The SpaceX IPO is the most anticipated initial public offering in years. At a targeted valuation of $1.75 trillion and a planned raise of $75 billion, it is set to surpass Saudi Aramco’s 2019 listing and become the largest IPO in history. Our clients have been asking about it, and we want to share our thinking directly.

The Business Case

Let’s start with what SpaceX has built: Starlink is a profitable, scalable business generating over $11 billion in revenue with a 39% operating margin, which is remarkable. Their launch segment holds what is effectively a monopoly on commercial heavy-lift rocketry. Starship could be a generational platform. These are real competitive advantages and are compelling arguments for the merits of the business.

Does the Offering Deserve More Scrutiny?

In February 2026, SpaceX merged with xAI, Elon Musk’s artificial intelligence company, and absorbed X (formerly Twitter) along with it. The merger transformed a profitable launch and connectivity company into one, posting a $4.9 billion net loss for 2025 and a $4.3 billion loss for the first quarter of 2026. The xAI segment burned $6.4 billion from operations in 2025. In short, Starlink’s profits are subsidizing xAI.

Investors subscribing to this IPO are not just buying SpaceX’s launch monopoly and Starlink’s cash flows, they are also getting exposure to xAI’s expensive infrastructure build-out and X’s declining advertising business. At a $1.75 trillion valuation, there is no margin of safety if any one of those businesses underperforms.

The Governance Structure Gives Us Pause

Elon Musk retains 85% of the voting control on 42% economic ownership. As minority shareholders, public investors would have little input on strategic decisions, including future mergers, capital allocation, or related-party transactions. The S-1 filed with the SEC by SpaceX discloses that xAI leases equipment from a board member’s firm worth over $20 billion in total.

At least one major institutional investor, Denmark’s AkademikerPension, has placed SpaceX on its exclusion list, based on its governance structure. Other institutional investors, including CalPERs, the largest defined-benefit public pension plan in the United States, have publicly voiced their concerns about governance and oversight.

Troubling Index Inclusion Rules

Ahead of the IPO, Nasdaq has changed its index inclusion rules. Newly listed mega-cap companies can enter the Nasdaq-100 in as little as 15 trading days, down from the previous three-month seasoning period. The minimum public float requirement has been eliminated entirely. A weighting multiplier of up to 3x has been introduced for low-float stocks, artificially inflating a new entrant’s benchmark weight beyond what its tradable share base would imply.

The seasoning period exists for a reason. It’s an important part of the market’s mechanism for price discovery; the process by which buyers and sellers, over time, establish fair value for a new public company before index funds are compelled to own it. Compressing that window to 15 days, eliminating the float requirement, and then amplifying the weight through a multiplier means that every fund tracking the Nasdaq-100 will buy SpaceX without adequate price discovery, on a thin float, and at whatever the price happens to be on rebalancing day.

FTSE Russell has similarly shortened their seasoning window to five trading days. Standard & Poor’s, to their credit, has held their existing standards.

It is difficult to accept the notion that changes to index methodology of this magnitude, made immediately before the largest IPO in history, could be in the best interest of investors, and should be examined carefully.

Our Positioning

The Colling Group U.S. Core Equity strategy is benchmarked to the S&P 500 and is built on a disciplined investment process. SpaceX wouldn't fit into our portfolio today, our factor model cannot produce a clear read on the quality of the combined entity’s earnings, and the governance structure is not consistent with the standards we apply to portfolio holdings.

We will watch the post-IPO price discovery with genuine interest. When SpaceX is included in the S&P 500, which requires meeting existing profitability and seasoning standards, we will assess it as we would any other name: through our process, on the numbers, at a price the market has had time to properly discover.

SpaceX may well prove to be a generational company, but that does not mean its IPO is a generational investment opportunity. These are quite different, and we think that the distinction matters.

As always, we welcome your questions.