Recently we asked boutique Investment Manager James Hambro & Partners LLP about the hottest IPO in history, SpaceX. As lots of clients and contacts are asking, we hope this commentary is useful.

Commentary from James Hambro & Partners LLP

You will no doubt have heard that SpaceX is set to IPO this week, with trading starting on Friday. At a slated $1.75 trillion valuation, it will be the largest IPO ever, raising c. $75 billion in cash for the company.

SpaceX can be thought of as a vertically integrated platform spanning three interconnected businesses: Space, Starlink, and xAI. The rockets division (often called the ‘Space’ segment) designs and launches reusable vehicles such as Falcon 9 and Starship, generating revenue from commercial satellite deployments, government missions, and crewed spaceflight while underpinning the entire ecosystem by providing low-cost, high-frequency access to orbit. Starlink is the satellite internet business, a global network of low‑Earth‑orbit satellites delivering broadband connectivity to millions of users; it has become SpaceX’s primary revenue and cash‑flow engine, benefiting from recurring subscription income and leveraging the company’s launch capability to continuously expand and upgrade the constellation. Finally, xAI represents the artificial intelligence arm which develops systems such as the Grok chatbot and broader AI infrastructure, with the strategic ambition of combining compute, data, and SpaceX’s orbital assets to build large-scale, potentially space‑based data centers and AI services. Together, these three divisions form a model in which rockets enable satellite deployment, Starlink monetises global connectivity, and xAI seeks to layer advanced computation and future growth on top of that physical infrastructure.

There are obvious strengths to the business: the technological edge they have in such a complex field gives a significant moat around their business, attracting the best talent and deepening relationships with government agencies; tapping unserved markets with Starlink; and owning physical infrastructure with excess capacity that is currently leased out to Anthropic far above current market rates. Love him or loathe him, having Elon Musk at the helm garners support from much of the public and within key government agencies.

However, the warning signs are numerous. As with any investment, the price one pays is a key contributor to the return made in that investment. At almost 100x sales, it is reasonable to assume much of the positive outlook has already been priced in. It is thought that the IPO has been oversubscribed fourfold, showing the excess demand for the shares. The amount of shares available to buy (known as the ‘float’) of $75 billion will likely be bought aggressively by all of the passive funds that track various indices. One must consider that the IPO was brought forward at record pace, alongside index inclusion rules being twisted to allow inclusion – perhaps the incentives are misaligned?

The valuation of SpaceX’s IPO equates to roughly 6% of US GDP. No other IPO has ever been this large and expensive simultaneously. SpaceX is highly sensitive to as yet unproven long-term assumptions, particularly around AI margins, utilisation and multiples. For the time being we eagerly watch from the sidelines.

Please contact your adviser if you have any questions.