As I’m writing this, the largest IPO in history is underway. SpaceX, which targeted a $135 IPO price, closed above $160 in its first trading day, making Elon Musk the world’s first trillionaire and SpaceX the sixth largest public company in the world. Talk about a rocket ship!
But something makes this IPO truly special: the huge amount of retail participation. To put things into perspective, historically, less than 10% of IPO shares were reserved for retail. For SpaceX, that number jumped to roughly 20% with Bloomberg reporting over $100B in retail orders submitted.1
While the numbers are astonishing, the story is the same. Retail loves expensive stocks that tell a story.
Not too long ago, Larry Swedroe wrote a post on Laarits and Sammon’s The Retail Habitat, a paper exploring the pocket in the market where institutions are largely absent. I will leave it to you to read the paper and Larry’s post – along with our YouTube video on the very topic. But while SpaceX’s IPO has mostly been reserved to institutions (as most IPOs are), it’s no surprise that retail makes up such large participation numbers.
According to the paper, stocks with high retail participation are harder-to-value, as characterized by (1) higher intangible capital, (2) longer duration cash flows and (3) greater likelihood of mispricing. The very presence of retail trading introduces noise to pricing mechanisms, deterring institutions from participating and leaving an ecosystem of retail investors who fight for the scraps. And scraps they are, as these stocks seem to lose systematically.
Using the closing price of $161.11, and SpaceX’s reported revenue in their SEC filings, the company currently trades at roughly 113 times revenue.2 We may not know what SpaceX’s price is going to do. Maybe it becomes part of the retail habitat, maybe not. But as a group, we know what tends to happen to growthy, overhyped stocks with longer duration cash flows that are hard to value. SpaceX may very well end up being an outlier who overcomes all odds, and I hope they do.
Nonetheless: investor beware.
Source: Laarits, Toomas and Sammon, Marco, The Retail Habitat (October 04, 2024).
Photo by SpaceX on Unsplash.
- Hughes. Kniazhevich. Lipschultz.“SpaceX IPO Said to Draw More Than $70 Billion in Retail Orders.” Bloomberg, June 11, 2026. https://www.bloomberg.com/news/articles/2026-06-11/spacex-ipo-said-to-draw-more-than-70-billion-in-retail-orders. ↩︎
- Space Exploration Technologies Corp., Form S-1 Registration Statement, filed May 20, 2026, U.S. Securities and Exchange Commission, EDGAR, https://www.sec.gov/Archives/edgar/data/1181412/000162828026042639/spaceexplorationtechnologi.htm. ↩︎
About the Author: Jose Ordonez
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