When you were a child, did you ever dream of growing up to be someone's money? Probably not.
But every time you buy shares in an IPO company, that's exactly what you're getting. Whether being an early exit investor is good or bad is hard to say in the long run. In time, you will surely find out.
The main reason I have invested a large percentage of my money in private companies over the past 20 years is because private companies stay private for a long time. Many benefits accrue to private investors at the expense of future public investors.
SpaceX, for example, was founded on March 14, 2002. It will finally IPO 24 years later on June 12, 2026. Microsoft was private for 11 years, Google for 6 years, and Facebook for 8 years before going public. Those who bought their IPOs and held on did well. I'm not sure the same will happen to SpaceX.
So that's one of the most common questions I get readers of the newsletter More recently: Will you invest in the SpaceX IPO?
My answer is NO, for several reasons.
You Don't Want to Run Out of Liquidity for Big IPOs
History has not been kind to large ($1+ billion) IPOs. Check out this chart that highlights the share price performance of selected major IPOs during the listing period. Note the last column, Year 1 Top Draw.
History is not on the side of large IPO investors, and that is if you buy shares at the IPO price.
The downside is worse if you buy a big IPO that fills a gap and chase it. A recent example is the Figma IPO (FIG) on July 31, 2025 at $33 per share. It gapped and ran to a high around $122. Today the share price is around $22. That is difficult.
You Don't Want to Be a Part of the Selling Stuff
Morgan Stanley priced Figma shares fairly at that time. The selling frenzy is the main reason why the stock price went up on the first day.
I have been investing in public stocks since 1996 and helped more than 100 companies IPO during my days at Goldman Sachs and Credit Suisse. My experience is simple. More retail participation creates more volatility, because retail investors are old paper hands and short-term holders.
So with SpaceX raising $75 billion, the largest IPO in history, and assigning 30% of the deal, about 22.5 billion shares, I see that as a net negative, not a net positive.
The volatility will be wild. If you are participating in an IPO, you better watch your position carefully in the first day and first week. Maybe take a day off to become a manic day trader, one of the worst things you can do for your investments.
Don't Want to Run Out of Liquidity in Bad Ratings
At the $135-per-share price SpaceX ( SPCX ) is targeting, valuing the company at about $1.77 trillion, its price-to-sales ratio would be more than 90-to-1. I think that is the highest P/S ratio in IPO history. Even IPOs that came to market at half that rate continued to underperform the market over the next three years.
Do you really want to get out of an overvalued company when the S&P 500 is also sitting at record highs? I don't want to.
Here's a look back at all the companies that traded more than 10x sales at the dot-com peak and what happened next.
- Cisco: ~25x sales, P/E over 200. Decreased -90%. It finally broke the 2000 peak in December 2025, 25 years and 8 months later.
- Intel: ~13x sales. Down -82%. It finally breaks the 2000 peak in May 2026, almost 26 years later.
- Microsoft: ~25x sales. Down -65%. It took 16 years and 8 months to make a new high (October 2016).
- Qualcomm: ~30x sales. It is down -88%. It took almost 20 years to break up.
- Sun Microsystems: ~10x sales. Down -97%. Acquired by Oracle in 2009.
- JDSU: ~50x sales. Down -99%. Strip parts.
- Yahoo: ~50x sales. Down -97%. I didn't want to sell to Microsoft for $44 billion, and then eventually sell to Verizon for a tenth of that.
- Nortel: ~15x sales. He died in 2009.
- Amazon: ~30x higher sales. Down -97%. Obviously a big winner now, but not before a lot of pain.
Investing at the right rates is important. Buying at nosebleed levels in an IPO is a great idea that works, especially if the company is not profitable. I had a front row seat to the 1999 mania sitting in the GS sales/trade area at 1 New York Plaza. Most investors lost their shirts within a year.
The better move is to wait for the hype to die down, then buy if you believe in the business and its growth trajectory. Retail has a great way of bidding hot IPOs up to irresponsible levels, only to have the price right when executives report their first few shares.
You're Going to Own SpaceX Anyway, So Why Are You Chasing Us?
Here's the kicker. With a value of $1.77 trillion, SpaceX debuts as a top 10 US company. Index funds will be forced to buy it, which means you will be forced to buy it too, automatically, with your S&P 500 and the total market capitalization.
You don't need to chase an IPO to own SpaceX. Wait for a few segments and the market will give you a position at any actual clearing price. Let the index do the work.
And remember, most retail investors aren't going to get IPO shares at $135 anyway. You will receive a small share, if any.
To almost everyone, “buying the SpaceX IPO” means buying SPCX on the open first thing in the morning, after it's already been hacked up (or down). That's not buying an IPO. That's a commitment to being a cash-out.
You Still Own Your Shares in SpaceX Through Venture Capital
Finally, I don't want to get out of SpaceX money because I already have funds that may sell part or all of their SpaceX assets at the IPO or after the close expires.
A traditional venture capital fund that I invested in back in 2022 had about 10% in SpaceX as of 1Q2026. I expect they will eventually sell the whole place, because they need to return the money to the LPs.
I also own a significant amount of the Fundrise Innovation Fund, VCX, which had about a 5% position in SpaceX as of 1Q2026. VCX is not required to sell anything publicly, as it is a permanent fund.
Having said all that, I have a large enough position in SpaceX that buying more would not be prudent from a risk/reward and asset allocation perspective. And even if I didn't have it due to leverage, I wouldn't buy the IPO for the above reasons.
What I'll Actually Do Instead
To be fair, here's a case to buy. Starlink is a real cash flow machine now, Starship can open up a whole new market, and there is no competitor. If you believe SpaceX is becoming the AWS of space, $135 might look cheap in ten years.
I'm not saying SpaceX is a bad company. I say I don't want to pay for a big company. The value is what protects you when the matter stumbles.
So what was I going to do? I was going to wait. Let the lockdowns expire, let the first earnings reports come in, let the frenzy die. If business is as good as the bulls say, it's still as good at $110 as it is at $135. And if not, I'll be happy to let someone else get it first.
If you must just own stocks, then buy with your disposable income that you can afford to lose 100%.
But as a long-time Tesla shareholder, I am optimistic that SpaceX will buy Tesla at a 50% premium!
Student Questions and Suggestions
StudentsAre you okay with cashing in on a hot and expensive IPO? What is your strategy for buying IPOs? Are you buying the SpaceX IPO, and why? What price do you think it is trading at after the first day? And do you think these mega IPOs will take money out of the public markets and cause a correction?
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