Original Title: The SpaceX IPO Will Be the Theft of the Century
Original Author: Lawrence Fossi
Translation by: Peggy, BlockBeats
Editor's Note: In the author's view, the SpaceX IPO is not an inspirational story of "a commercial space giant going public," but a carefully designed wealth transfer. The article first questions the core valuation basis of SpaceX: whether it is the heavier Starlink satellites, orbital data centers, NASA Artemis missions, or the narratives about colonization of the Moon and Mars, they all rely on a Starship that is far more advanced than the current version; however, from the author's perspective, the technological realization of Starship remains fraught with uncertainty, and the xAI and data center stories fail to truly support its enormous valuation.
The sharper part lies in the financial structure. The author believes that adjustments by Nasdaq, the S&P 500, and FTSE Russell to index inclusion rules may enable SpaceX to quickly enter major indices under conditions of low liquidity, forcing a large number of passive index funds to buy in at inflated valuations. Thus, early private investors, insiders, and long-term capital providers will gain an exit window, while ordinary 401(k) and IRA retirement account investors will passively assume the risk. This is also referred to in the article as the "Rikishi moment" (index funds, once seen as a boon for ordinary investors, being publicly humiliated and downgraded in an absurd scenario): low-fee index funds were originally a market tool left for the average person by John Bogle, but now, due to a rewrite of the rules, they may become a channel for capital exit and risk transfer.
The article concludes by stating that even if the IPO is successful, SpaceX may still face massive funding gaps, continuous dilution financing, lack of governance rights, and forced arbitration issues. Its subsequent impact extends beyond SpaceX itself: this IPO could affect liquidity in the stock and crypto markets, serve as a stress test for the AI bubble, and potentially undermine the long-standing trust that index funds have built. The author's conclusion is not to suggest shorting SpaceX but to remind investors: when the narratives of Musk, passive index funding, and market fervor intertwine, the most dangerous aspect is often not that the story is not big enough, but that ordinary people do not have the right to choose not to participate.
Below is the original text:
As the SpaceX IPO approaches, here are a few observations and predictions:
1. From a business perspective, SpaceX will face a brutal failure
Essentially, the entire valuation logic of SpaceX is built upon the Starship project. And what I mean by "Starship" is a Starship that is far more powerful than the version we currently see.
· Launching the heavier V3 Starlink satellites requires Starship.
· To make these launch tasks—and other launch services provided to third parties—more economical, reusable Starship is needed.
· The promised orbital data center requires Starship.
· Fulfilling SpaceX's obligations to NASA's Artemis program requires Starship.
· Any lunar colony or Martian colony will also require Starship. SpaceX's IPO registration document even predicts, "New trillion-dollar markets will arise on the Moon, Mars, and even further afield."
But the problem is that Starlink satellites operate in an orbit approximately 300 miles from Earth, while the highest altitude Starship has achieved so far—during the recent Version 3 launch—was only 121 miles, with both the booster and upper stage losing out. The gap from 121 miles to 300 miles is still vast and would require a significant amount of additional fuel. Will Lockett has done calculations showing why the Version 3 Starship, in his words, is actually "of no practical value."
And this does not even touch on the issue of the orbital data center being almost physically impossible to achieve, nor does it discuss the extremely low probability of Starship completing the cryogenic propellant transfer task in Artemis III.
(I've used this metaphor before, but I love it so much that I can't help but use it again.)
Of course, you might think that even stripping away the orbital data center, xAI is the real key to SpaceX's ultimate success. If you think this way, I suggest you check out the facts discussed by Patrick Boyle in this YouTube video (starting at 10 minutes and 25 seconds). As Boyle points out: this company's (xAI's) AI products account for 93% of the market that SpaceX claims to reach; yet, even its flagship product Grok is not used by its own engineers. Moreover, it is trying to spend $60 billion to acquire rival Cursor to truly get its product off the ground.
As for that heavily promoted $15 billion contract with Anthropic, Boyle raises an obvious question: xAI is effectively renting out the computing power and hardware in its Colossus and Colossus II data centers to competitor Anthropic. This strongly suggests that xAI is currently unable to fully utilize its data center capacity. (Boyle also points out a less obvious point: Anthropic can cancel this three-year agreement at any time with 90 days' notice.)
However, all these hard facts will take time to fully reveal. How long? Two years? One year? Maybe even shorter?
But one thing, unfortunately, I am quite sure of: the various private investors who have invested in SpaceX over the past twenty years will have ample opportunity to offload their shares at massive profits to unsuspecting public investors before these facts are fully exposed.
2. As a wealth transfer machine, SpaceX will achieve astonishing success
A series of rule changes by Nasdaq, the S&P 500, and FTSE Russell all but guarantee that the SpaceX IPO will greatly enrich SpaceX insiders while robbing defenseless ordinary retirement investors who pour their 401(k) and IRA retirement funds into broad-based index funds.
A. Nasdaq fired the first shot in this shameful parade
As early as March 10, when rumors about the SpaceX IPO were still in their infancy, the author of the Substack column "Keubiko's Musings" published a prescient article titled "The Shame of Nasdaq," subtitled: "How to Manipulate an Index to Cater to a Billionaire."
Nasdaq not only eliminated the so-called "listing maturity" requirement, allowing SpaceX to enter its index just 15 days after the IPO; it also changed how weights are adjusted for "low float" stocks in the Nasdaq 100 Index.
SpaceX will be a stock with extremely low float, with only 5% of its shares available for sale, but Nasdaq will treat it as if it were 15% of the total outstanding shares for weight calculations. According to Keubiko: the index is giving a constrained, tightly controlled float a fictional weight in the hundreds of billions of dollars. Hundreds of billions of price-insensitive passive capital will be forced by legal and regulatory requirements to buy this stock in large volumes within just a few days. You are essentially forcing a fire hose of giant index capital into the narrow real liquidity of a garden hose. This is precisely the formula for creating a massive, false supply-demand squeeze.
Oh, but it gets worse. Much worse. As Keubiko wrote, the math will become "truly brutal" here.
Once the insiders' 180-day lockup period ends, and the float of SpaceX exceeds 20%, Nasdaq will calculate the weight of this stock based on 100% of the total float.
Of course, Musk has perfectly timed the end of the lockout period to coincide with the rebalancing of the Nasdaq index in mid-December. Keubiko writes again: index funds will be forced, under regulatory requirements, to buy billions of dollars of this stock at the very moment insiders are able to flood the market with their unlocked shares. Do you feel your liver being turned into foie gras yet?
Since Keubiko first blew the whistle in that article, many financial journalists and market experts have realized what is happening. Now, you can find a plethora of articles describing how Nasdaq has rewritten the rules to ensure millions of passive investors—those ordinary people who have invested their pensions in broad-based index funds—are forced to buy SpaceX stock at outrageous valuations.
B. Other major indices are also joining this parade
In this race to the bottom, the S&P 500 has now also modified its rules to include index constituents through a "fast track" method, no longer requiring related companies to prove their profitability.
It is foreseeable that FTSE Russell will not lag behind and will soon follow suit.
C. "Rikishi Moment"
Phil Bak has recently received a lot of attention for his excellent Substack article "The Rikishi Moment." The title comes from a profound humiliation endured by the late great baseball player Pete Rose—who, although great, had serious flaws.
Bak is keenly aware of what a precious gift low-fee index funds, created by John Bogle of Vanguard, brought to ordinary investors. But what was once an extremely beneficial market tool has now, in the hands of cynics and rogues, turned into an evil tool. Bak writes: John Bogle is no longer with us, and I can only imagine how he would view all that is happening to index funds today. I can only imagine his equally sad eyes. I can only imagine him watching with the same bewildered, weary acceptance as his once-great invention from such lofty heights tumbles into the gutter of fraud.
D. Who will benefit from this theft?
This question seems too easy to answer, doesn't it? Of course, it is Elon Musk, and his circle of long-time facilitators, like Antonio Gracias, Steve Jurvetson, and Ira Ehrenpreis.
But the beneficiaries extend far beyond Musk's inner circle. As excellent Rupert Mitchell (author of Blind Squirrel Macro) said in a recent podcast: nearly every prominent individual in the past 20 years has had the opportunity to buy into SpaceX—and indeed has bought into SpaceX. Trust me, everyone has it. No sovereign wealth fund, no institution, no mutual fund, no private equity firm, and no cross-sector hedge fund lacks significant holdings of this stock—and their buying prices are all far below the price at which it is being publicly offered in the IPO.
Unsurprisingly, guess who else we can add to Rupert's list:
3. What happens after the thief escapes the scene?
This question is easy to answer: disappointing business performance (see the first part of this article), along with endless equity dilution.
The SpaceX IPO, even including the "green shoe option," can raise at most about $85 billion. But a close reading of its registration documents—Greg Collins of Cape Fear Advisors has done such an analysis—reveals that by 2030, SpaceX's capital needs will reach approximately $235 billion.
If we assume SpaceX raises $85 billion through the IPO and uses $20 billion to pay off debts, there will still be a funding gap of $170 billion. (Collins expects the fundraising amount to be lower and the gap to be larger, but in any case, this is a huge gap.)
Of course, a straightforward solution is to drain Tesla's cash reserves: whether through mergers or further forcing Tesla to invest in SpaceX. But Tesla's cash is nowhere near enough to fill the money-burning furnace that SpaceX represents.
Going forward, it will be—forecasted even by the S-1 document—endless dilutive financing. Deep within the revised S-1 document of SpaceX lies a warning: we may issue a large number of shares in the future due to related transactions.
Even this statement itself can be said to be misleading. It's not that the part about "issuing a lot of shares in the future" is problematic; this will almost certainly happen.
The issue is whether these issuances are indeed for "future transactions"? Elon, are you really trying to say: to fulfill the transactions SpaceX has already committed to in the S-1 documents?
As for any misleading statements or misinformation potentially present in the registration documents, as well as any misconduct from Musk and other executives or directors now or in the future, affected investors will have almost no recourse.
SpaceX shareholders will be forced to accept mandatory arbitration. They have no meaningful voting rights. And governance disputes will be decided by a brand-new Texas commercial court, presided over by a judge sympathetic to Musk—and juries will not be allowed.
4. Final Thoughts
The following thoughts are not in any particular order. Also, keep in mind that the only law Elon Musk cannot easily violate is the "law of unintended consequences."
A. Everything may collapse
The SpaceX IPO could face catastrophic failure from the start and may even be delayed or canceled. The reason is simple: there may be too many shares eager to find buyers, while there is not enough cash in the market to absorb them.
Rupert Mitchell and Ben Brey discussed these possibilities in a highly informative written report and subsequent podcast.
B. It may impact the stock and crypto markets
SpaceX is unprecedentedly offering 30% of its issuance to retail investors, who must find cash from somewhere.
Therefore, this IPO could trigger a massive and disruptive sell-off. The most obvious candidates for sale are stocks and crypto assets since those wishing to participate in the subscription will need to sell other assets to raise cash. In fact, the downward pressure on Bitcoin prices in recent weeks may partially stem from this type of sell-off. (Michael Saylor's recent actions further fueled this fire.)
C. It may burst the AI bubble
Chris Irons of Quoth The Raven believes the SpaceX IPO will serve as a market referendum, testing whether the AI investment bubble can continue to expand.
If SpaceX goes public successfully and garners overwhelming demand, it indicates that despite red flags everywhere, investors are still willing to disregard traditional investment disciplines and continue to believe in the story. But if the outcome is disappointing, it may mark the beginning of the end for this investment cycle.
(In a recent podcast with Adam Taggart, Chris described the current financial market as "a digital casino on cocaine.")
D. It may permanently damage the popularity of index funds
For decades, index funds have provided ordinary people—those without intricate financial knowledge but in need of retirement investments—with low-cost opportunities to gain broad market exposure.
But the SpaceX IPO is a huge trap for these ordinary people. If the scenario I foresee truly happens, they will be forced to buy in at severely inflated prices, only to watch helplessly as the assets they purchased inevitably depreciate.
This could leave a sufficiently severe stain on index funds, such that sponsors and managers of 401(k) plans, as well as financial advisors in a broader sense, will no longer recommend them as suitable investment vehicles.
E. Do not attempt to short SpaceX!!
Elon Musk is a figure with cult-like charisma. More importantly, he has repeatedly proven that he is almost immune to any genuine market, legal, or regulatory scrutiny.
Musk's critics are right about many things: Tesla's terrible fundamentals, the lies about fully autonomous driving, the fantasies of Robotaxi, and shaky accounting practices. But when they think these issues will affect the stock price, they are mistaken.
One day, somewhere, someone will make a lot of money shorting Tesla or SpaceX. But that person will most likely not be you.
At least for now, the best way to understand Tesla is not as a financial investment but as a religion. Today, SpaceX can also be included in this category.
So my advice is: stay away from it. Tend to your garden. Play with your children. Read a good book. Listen to a great piece of classical music. Here is a recording I recently heard and highly recommend.
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