Editor's Note: In the author's view, the SpaceX IPO is not an inspirational story of a "commercial space titan going public," but rather a meticulously designed wealth transfer. The article first questions the core valuation basis of SpaceX: whether it is the heavier Starlink satellites, the orbital data center, the NASA Artemis mission, or the lunar and Martian colonization narrative, almost all rely on a far more mature version of Starship; yet, in the author's opinion, the technological realization of Starship remains highly uncertain, and the xAI and data center narratives have not truly supported its massive valuation.
The sharper part lies in the financial structure. The author believes that adjustments to index inclusion rules by Nasdaq, S&P 500, and FTSE Russell may enable SpaceX to rapidly enter major indices under low float conditions, forcing a large number of passive index funds to buy in at a high valuation. As a result, early private investors, insiders, and long-term capital providers will have an exit window, while ordinary 401(k) and IRA retirement account investors will passively bear the risk. This is also what the article refers to as a "Rikishi Moment" (once seen as an index fund gospel for ordinary investors, publicly humiliated and demoted in an absurd scenario): low-cost index funds were originally a market tool left to the common people by John Bogle, but now, due to rule rewrites, they may become channels for capital exit and risk transfer.
In conclusion, the article further points out that even if the IPO is successful, SpaceX may still face significant funding shortfalls, ongoing dilutive financing, governance challenges, and mandatory arbitration. Its aftermath is not limited to SpaceX itself: this IPO may disrupt stock and crypto market liquidity, serve as a stress test for the AI bubble, and damage the trust long built by index funds. The author's conclusion is not to advise shorting SpaceX but to remind investors: in the intertwining of Muskian narratives, index passive funds, and market frenzy, the most dangerous thing is often not that the story is not grand enough but that ordinary people fundamentally lack the right to choose not to participate.
The original text follows:
As the SpaceX IPO approaches, several observations and predictions:
1. From a commercial perspective, SpaceX will face a brutal failure
Essentially, SpaceX's entire valuation logic is built around the Starship project. And when I say "Starship," I am referring to a Starship far more powerful than what we currently see.
·Launching the heavier V3 version of Starlink satellites requires Starship.
·To make these launch missions—and other launch services provided to third parties—more cost-effective, a reusable Starship is needed.
·The promised orbital data center requires Starship.
·Fulfilling SpaceX's commitment to the NASA Artemis program requires Starship.
·Any lunar or Martian colony also requires Starship. SpaceX's IPO registration statement even prophesied, "A new trillion-dollar market will emerge on the Moon, Mars, and beyond."
However, the issue lies in the fact that Starlink satellites operate in a orbit around 300 miles above Earth, while the highest altitude Starship has reached to date—both booster and upper stage were lost in the recent Version 3 launch—is only 121 miles. The distance from 121 miles to 300 miles is quite significant, requiring a substantial amount of additional fuel. Will Lockett has calculated and explained why the Version 3 Starship, in his words, actually has "no practical value."
This is not even to mention the nearly insurmountable physical challenges of the orbital data center, nor the very low likelihood of Starship completing the cryogenic propellant transfer task in Artemis III.
(I've used this analogy before, but I love it so much I can't resist using it again.)
Of course, perhaps you believe that even without the orbital data center, xAI is the true key to SpaceX's ultimate success. If you think so, I suggest you look into the facts discussed by Patrick Boyle in this YouTube video segment (starting from 10 minutes and 25 seconds). As Boyle points out: the AI products of this company (xAI) occupy 93% of the market that SpaceX claims to be accessible, but its flagship product Grok is not even used by its own engineers. And it is currently trying to spend $60 billion to acquire its competitor, Cursor, to get its product up and running.
As for the extensively publicized $15 billion annual Anthropic contract, Boyle poses an obvious question: xAI is actually leasing the computing power and hardware in its Colossus and Colossus II data centers to its competitor Anthropic. This strongly implies that xAI is currently unable to fully utilize its data center capacity. (Boyle also raises a less obvious point: Anthropic can cancel this three-year contract at any time with a 90-day advance notice.)
However, all these hard facts will take some time to fully materialize. How long? Two years? One year? Perhaps shorter?
But one thing, unfortunately, I am fairly certain of: various private investors who have invested in SpaceX over the past two decades have had more than enough opportunity to offload their shares to the unsuspecting public at a massive profit before these facts are fully revealed.
II. As a Wealth Transfer Machine, SpaceX Will Achieve Astonishing Success
A series of rule adjustments by Nasdaq, S&P 500, and FTSE Russell will almost guarantee that SpaceX's IPO will greatly enrich insiders at SpaceX, while plundering the unsuspecting ordinary retirement investors who have put their 401(k) and IRA savings 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 the early stages, the author of the Substack column Keubiko's Musings published a highly prescient article titled "The Shame of Nasdaq," subtitled: "How to Manipulate an Index to Please a Billionaire."
Nasdaq not only cut the so-called "seasoned listing" requirement, allowing SpaceX to enter its index just 15 days after the IPO; it also changed the way it weights "low float" stocks in the Nasdaq 100 index.
SpaceX will be a stock with an extremely low float, with only 5% of shares available for sale, but Nasdaq will treat it as if the float is 15% of the total market cap for weighting purposes. As Keubiko puts it: this index is slapping a contrived, multi-billion dollar weight on a restricted, tightly controlled float. Passive funds with billions insensitive to price will be forced by statute and rule to buy this stock aggressively over the course of a few days. You are effectively funneling giant index capital into a narrow stream of actual liquidity. This is the formula for creating a massive, false supply-and-demand squeeze.
Oh, but it gets worse. Much worse. As Keubiko writes, the math here is going to get "truly brutal."
Once the insiders' 180-day lockup period ends, and SpaceX's float exceeds 20%, Nasdaq will calculate the stock's weight based on 100% of the total float.
Of course, Musk perfectly timed the end of the lockup period to coincide with Nasdaq's mid-December index rebalancing. Keubiko once again wrote: Index funds will be forced, per the rules, to sell billions of dollars' worth of other stocks to buy billions of dollars' worth of this one stock at the exact moment insiders can finally dump their unlocked shares on the market. Do you now feel like your liver is being squeezed into foie gras?
Since Keubiko first blew the whistle in that article, many financial journalists and market experts have realized what is happening. Now, you can find numerous articles describing how Nasdaq, through rule rewrites, ensures that millions of passive investors—those who have poured their retirement savings into broad index funds—are forced to buy SpaceX stock at ridiculous valuations.
B. Other Major Indexes Join the Parade
In this race to the bottom, the S&P 500 has now also amended its rules to fast-track inclusion of index constituents and no longer require companies to demonstrate sustained profitability.
Predictably, the FTSE Russell index is not one to be left behind and is quickly following suit.
C. The "Rikishi Moment"
Phil Bak recently garnered significant attention with an excellent Substack article titled "The Rikishi Moment." This title derives from a profound humiliation suffered by the late great baseball player Pete Rose—an acknowledgment that while he may have been great, he also had serious flaws.
Bak is acutely aware of how John Bogle, the inventor of low-cost index funds and founder of Vanguard Group, once gave ordinary investors such a precious gift. However, what was once an incredibly beneficial market tool has now turned into a nefarious instrument in the hands of cynics and scoundrels. Bak writes: John Bogle is no longer with us, and I can only imagine how he would view all that is happening today in the world of index funds. I can only imagine his equally mournful eyes. I can only imagine how, with the same bewildered and fatigued sense of resignation, he would watch his once-great invention, which stood at such a height, plummet into the fraud-ridden sewer.
D. Who Will Benefit from This Heist?
This question seems too easy to answer, doesn't it? Of course, it is Elon Musk, along with his cohort of long-term enablers like Antonio Gracias, Steve Jurvetson, and Ira Ehrenpreis.
But the beneficiaries are far more than just Musk's inner circle. As the insightful Rupert Mitchell (author of Blind Squirrel Macro) said in a recent podcast: Over the past 20 years, almost every well-known person has had the opportunity to buy into SpaceX—and indeed has bought into SpaceX. Trust me, everyone holds it. No sovereign wealth fund, no institution, no mutual fund, no private equity firm, and no crossover hedge fund holds a significant amount of this stock—and their purchase price was much lower than the current IPO price.
Not surprisingly, guess who else we can add to Rupert's list:
III. What Happens When the Thief Escapes the Scene?
This question is easily answered: disappointing business performance (see Part I of this article) and endless equity dilution.
SpaceX's IPO, even with the inclusion of the "greenshoe option," can only raise about $850 billion at most. However, a careful reading of its registration statement reveals—a reading already done by Greg Collins of Cape Fear Advisors—that by 2030, SpaceX's capital needs will be around $2.35 trillion.
If we assume SpaceX raises $850 billion through the IPO and uses $200 billion of it to pay off debt, there will still be a $1.7 trillion funding gap. (Collins expects the fundraising to be smaller and the gap to be larger, but in any case, this is a huge gap.)
Of course, an obvious solution is to tap into Tesla's cash reserves: whether through a merger or further compelling Tesla to invest in SpaceX. However, Tesla's cash is nowhere near enough to plug the money pit that is SpaceX.
The future will be—forewarned even by the S-1 filing—an endless cycle of dilutive financing. Buried deep in SpaceX's amended S-1 filing is this warning: we may issue a significant amount of equity in the future through these transactions.
Even that statement itself could be said to be misleading. It's not that the part about "issuing significant amounts of equity in the future" is problematic; that's almost certain to happen.
The issue is, are these issuances really for "future transactions"? Elon, aren't you really saying: to fulfill those commitments that SpaceX has already promised in the S-1 filing?
As for any misleading statements or false information that may exist in the registration documents, and regarding any misconduct by Musk and other executives, directors now or in the future, aggrieved investors will be almost powerless.
SpaceX shareholders will be forced into mandatory arbitration. They have no meaningful voting rights. Governance disputes will be resolved by a new Texas Business Court overseen by Musk-friendly judges—and jury trial waivers.
IV. Final Thoughts
The following thoughts are not in order of priority. Also, please remember, the only law Elon Musk cannot blatantly violate is the "law of unintended consequences."
A. It Could All Come Crashing Down
SpaceX's IPO could face a catastrophic failure from the start, or even be delayed or canceled. The reason is simple: there may be too many shares looking for buyers initially, and there may not be enough liquidity 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 Could Rattle the Stock and Crypto Markets
SpaceX is unprecedentedly offering 30% of its IPO shares to retail investors, who must come up with cash from somewhere.
Therefore, this IPO could trigger a large-scale and disruptive sell-off. The most obvious candidates would be stocks and crypto assets, as those looking to subscribe would need to sell other assets to raise funds. In fact, the recent downward pressure on Bitcoin prices in the past few weeks may partly come from such selling. (Michael Saylor's recent moves have further fueled this fire.)
C. It Could Pop the AI Bubble
Quoth The Raven's Chris Irons believes the SpaceX IPO will be a market plebiscite to test if the AI investment bubble can still expand.
If SpaceX successfully goes public and receives overwhelming demand, it indicates that despite numerous red flags, investors are still willing to suspend traditional investment discipline and continue to believe in this narrative. But if the results disappoint, it could mark the beginning of the end of this investment cycle.
(In a recent podcast with Adam Taggart, Chris described the current financial markets as "a cocaine-addled digital casino.")
D. It Could Permanently Damage the Popularity of Index Funds
For decades, index funds have provided an opportunity for ordinary people — those without sophisticated financial knowledge but needing to invest for retirement — to access broad market exposure at an extremely low cost.
However, the SpaceX IPO is a significant pitfall for these ordinary individuals. If the scenario I foresee materializes, they will be forced to buy in at a severely inflated price, only to then watch as the asset they purchased inevitably depreciates.
This could leave a significant stain on index funds, to the point where 401(k) plan sponsors and administrators, as well as more broadly financial advisors, 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 demonstrated that he is nearly immune to any truly effective market, legal, or regulatory scrutiny.
Much of what Musk's critics say is right: Tesla's poor fundamentals, lies about full self-driving, the RoboTaxi fantasy, shaky accounting practices. But when they think these issues will impact the stock price, they are wrong.
Someday, somewhere, someone will make a lot of money by shorting Tesla or SpaceX. But that someone is highly unlikely to be you.
For now, the best way to understand Tesla is probably not as a financial investment, but as a religion. Now, SpaceX can be added to that category as well.
So my advice is: stay away from it. tend to your garden. play with your kids. read a good book. listen to a great piece of classical music. Here's a recording I recently heard and would highly recommend.
Welcome to join the official BlockBeats community:
Telegram Subscription Group: https://t.me/theblockbeats
Telegram Discussion Group: https://t.me/BlockBeats_App
Official Twitter Account: https://twitter.com/BlockBeatsAsia
