Fundhouse Insight - To SpaceX and beyond
This article has been prepared by Fundhouse and is reproduced by LifeMap Financial Planning for general information. It reflects Fundhouse's views as at the date of publication and those views may change. It does not take account of your individual circumstances and should not be treated as personal financial advice or a personal recommendation.
Recent reports suggest Elon Musk is looking to take SpaceX public by listing it on the Nasdaq through an Initial Public Offering (IPO). In simple terms, this means everyday investors would be able to buy part of the company for the first time. As the countdown begins for what could become the largest new listing (IPO) in history, investors appear to be channelling their inner Buzz Lightyear, looking "to infinity and beyond" when valuing it. At an anticipated valuation of $1.75 trillion, the key question is whether the entry price has escaped the pull of gravity, and what this means for markets and investors.
SpaceX’s story rests on three core parts: First is Starlink, the satellite communications business and internet provider which already makes money and generates most of the group’s revenue. Second is their space division, a pioneer in reusable rockets and aims to make space travel available to the wider public, amongst other ambitions. Third is xAI which includes a rival to ChatGPT (Grok), data centres, supercomputers and X (formerly Twitter). The latter two are currently loss making, so the astronomical valuation is based not on what the company earns today, but on what investors believe it could become in the future. That future includes activities that barely exist yet – such as space tourism and asteroid mining.
Revenue in 2025 was estimated to be $16bn. Even if that figure doubled to $32bn in 2026, investors would still be valuing the company at around 55 times annual revenue – meaning people would be paying roughly $55 for every $1 of annual sales the company currently produces. That is an unusually high price. For comparison, Nvidia trades at a revenue multiple in the low-20s range. In simple terms, investors are paying a much bigger premium for SpaceX because they believe the company could become enormously successful in the future. This matters for investors because when a company’s valuation is based heavily on future (and extremely positive) expectations, it leaves very little room for disappointment.
For example, SpaceX has very little profit today, if any. Even if it eventually became as profitable as Apple, earning around $100bn a year in profit, investors would still be valuing the company at around 17.5 times annual earnings (historically the average company on the S&P500 is valued at 16-17 times annual earnings). And Apple is one of the world’s top four most profitable firms. This scenario means that even if growth at SpaceX is good, investors could be disappointed because they are predicting exceptional results. This sort of asymmetry in expectations is usually worth avoiding – if things end up being exceptional, you break even, but if they are good (and anything below good), you can lose a lot of capital.
The ripple effects of this likely listing are already being felt in other parts of the stock market. For example, Google’s parent company, Alphabet, owns a c.6% stake in SpaceX. As SpaceX’s valuation rises, this increase appears in Alphabet’s financial results as a gain (via ‘Other Income’), helping make its overall performance look stronger - even though nothing has actually been sold or turned into cash. There is also a knock-on effect for index funds. These are large funds that automatically track the stock market and buy shares in companies based on set rules. Because SpaceX is so large, index providers are considering changing their rules to allow SpaceX to be included more quickly in major indices sooner than usual. This is important for passive investors, as this means SpaceX may soon become a mandatory holding in many portfolios and index trackers, regardless of valuation concerns. We are nervous of pure passive indices for these sorts of reasons.
At Fundhouse, we admire the technical brilliance and market-disrupting capabilities of Elon Musk’s space adventures. However, as stewards of your clients’ capital, we have to distinguish between a great company and a great investment. A world-class company can still become a poor investment idea when the price you pay is too high. Consequently, we expect our portfolios to remain tilted away from this hyper-expensive segment of the market (whilst still maintaining some exposure, typically below that of our peers). We will, however, be keeping a keen eye on how events unfold in what may be considered the beginning of the space age.
Disclaimer: Markets and headlines are moving quickly, and the figures quoted here will move as new developments emerge. Fundhouse is the trading name of Fundhouse Bespoke Limited. Fundhouse provides investment management services and does not provide financial advice. Importantly, this note does not represent investment advice, and any reader should always speak to their financial adviser before making any investment decisions. Please note that the value of any investment may go down as well as up, and you may lose capital when investing, and the value of your investments may not always increase. Please ensure that you are comfortable bearing financial losses and that you are comfortable taking a long-term investment view of five years or more. Source of data: We have sourced the profitability and revenue of SpaceX and the listing value from various articles on Google and have sourced the profitability of Apple from their 2025 financials, adjusting it for reasonableness.
