The SpaceX IPO proves the US stock market is broken

STEVEN Spielberg has an alien movie opening in June, but that may not be the biggest science fiction blockbuster of the summer; it could be the SpaceX initial public offering (IPO).

As part of its pitch to sell shares on the stock market, Elon Musk’s aerospace and technology company said it will capture over US$28 trillion of the artificial intelligence market – nearly the size of the entire US economy.

It said it plans to launch one million satellites to put data centres in outer space, though the technology does not yet exist.

And, it vowed to hand Musk huge amounts of stock if he establishes a Mars colony that houses one million people (though no human has been within about 35 million miles of the planet).

Musk could well believe his own projections. What is harder to understand is why so many investors do, given his recent track record of missed deadlines, abandoned products and failed business predictions.

Remember, Musk said that he would nearly treble Twitter’s advertising revenue in five years. (It’s down approximately a third.)

He claimed that the Boring Company, then a SpaceX subsidiary, had received verbal government approval for a superspeed hyperloop that would take you from New York to Washington in 29 minutes. (The plan went nowhere.)

He said that Tesla’s Cybertruck could operate briefly like a boat. (A driver had to abandon his vehicle in a lake.)

Still, investors are largely buying what Musk is selling. SpaceX’s listing on the Nasdaq in June is expected to be one of the largest IPOs of all time.

Why?

Banking on Musk’s name

To understand what’s going on, you have to see the game for what it is. Whether it makes sense or not, the market has heavily rewarded Musk’s utterances for some time.

There are parallels to the meme stock phenomenon, in which a company’s shares soar primarily on the strength of viral social media hype.

Not everyone approves of the practice of investing from a tweet or a Reddit post. It reflects “overconfidence, financial ignorance and a wealth-reducing love of gambling”, declared economists Owen Lamont and Richard Thaler.

That was three years ago; little has changed since, except for the proliferation of even more ways to bet.

And right now, many members of the establishment – investment banks, venture capital firms and institutional investors – are making a lot of money by embracing Musk’s declarations rather than questioning them.

In such a world, who cares if he said SpaceX would send a spacecraft to Mars by 2018? Or even 2022? Who cares if the company still has not delivered on the US$2.9 billion contract it won five years ago to build a lunar lander for the National Aeronautics and Space Administration?

Who cares if several SpaceX Starship test flights in 2025 ended in failure?

To be clear, SpaceX is a legitimately successful company. It is a pioneer in developing new space technology with a near-hammerlock on the orbital launch business.

Starlink, its satellite-based internet service, has been a game changer for global connectivity, generating over US$11 billion in revenue in 2025, or 61 per cent of SpaceX’s total sales.

That is real money, albeit a rounding error against the reported US$1.75 trillion valuation that SpaceX is targeting, which would make it one of the 10 most valuable companies in the world.

As a SpaceX adviser explained: “The valuation makes no sense. But Elon is great at getting people to dream.”

Weakened regulations, stronger storytelling

Companies issue projections when launching an IPO, as the premise of the exercise is to allow members of the public to bet on a company’s future growth.

But for decades, the SpaceX level of naked wishcasting was limited by the prospect of potential legal trouble.

Then in 1995, the US Congress passed the Private Securities Litigation Reform Act. Designed to ward off excessive lawsuits, it gave companies far greater freedom in what they were allowed to say about their futures.

The continued weakening of traditional restraints eventually granted executives a wide berth for “speculative optimism”, said Amit Seru, a finance professor at the Stanford Graduate School of Business.

“Combine that with a culture increasingly comfortable with long-duration technology bets, and the equilibrium naturally shifts towards more aggressive storytelling.”

Musk’s success with Tesla, his electric vehicle company, has played a role in the stock market’s transformation. The business overcame long odds and shifted the entire world towards an EV future.

Along the way, he built himself a loyal fan base via social media.

He created a phenomenon where his followers were willing to invest in his declarations – from Tesla to Dogecoin – based mostly on their faith in him (or, at a minimum, their faith that others would buy in based on what he had to say).

SpaceX and Tesla’s valuations fundamentally challenge the conventional assumption that money follows performance. Despite tanking Tesla’s brand, and two straight years of declining sales, Musk received a US$1 trillion pay package last year.

Tesla is worth almost five times more than Toyota, though it sells approximately one-sixth the number of cars. That’s because Tesla now says its future is not cars anymore, but the humanoid robots it will someday produce.

Musk’s deal-making and the fees it generates make his ecosystem highly lucrative. The result is a tangled web of financing deals involving all the same people.

First, investors gave Musk billions of dollars to acquire Twitter (now X), only to see the value of their investment collapse as he alienated advertisers and drove users off the platform.

Some of those same parties, such as Fidelity and VyCapital, funded development of Musk’s next venture, an AI company called xAI, which he merged with X, folded into SpaceX and valued at US$250 billion.

That’s like buying a house, then selling it to yourself for about five times the price and announcing that you have made a fortune.

Some of those same banks that advised Twitter during Musk’s acquisition, such as Goldman Sachs and JPMorgan, will now collect fees on the SpaceX IPO itself, which will then help X pay off billions of dollars of debt.

Wall Street benefits

In Silicon Valley, the result right now is a merry-go-round of profit and consequence-free failure as the same insular coterie of investors, entrepreneurs and banks continually fund one another’s next moves.

Ryan Breslow, the CEO of the checkout technology company Bolt, stepped down in 2022 amid allegations that he misled investors and inflated company metrics, crushing the company’s valuation.

Yet, for some reason the board brought him back to lead the company in 2025.

This dynamic may also explain how the co-working startup WeWork went from a US$47 billion valuation to bankruptcy, while its CEO Adam Neumann walked away with up to US$1.7 billion.

He then raised about US$350 million from a leading venture capital firm, Andreessen Horowitz, for another real estate venture.

There may not be consequences for insiders in Silicon Valley or on Wall Street yet, but Musk’s ever-rising, hype-driven wealth certainly affects the rest of us.

His huge political spending has given him influence over government officials, including regulators who might otherwise scrutinise his companies. His control over the Trump administration’s Department of Government Efficiency crippled some government agencies.

Is it any wonder that 67 per cent of Americans believe that the economy is rigged to advantage the rich and the powerful?

The real question is whether this party will end. Dr Seru, like many finance experts, said it will. “Eventually, fundamentals still matter.”

But who knows when that might happen? From birtherism to AI deepfakes, fiction has outrun reality for years now. NYTIMES

The writer is a tech communications consultant and a former executive at Square