The SpaceX IPO: What I’m Watching, and What I’d Want You to Know

PORTFOLIO MANAGER COMMENTARY

A note from your portfolio manager ahead of one of the most-watched public offerings in market history

Date: May 26, 2026

Subject: Space Exploration Technologies Corp. (planned ticker: SPCX)

Source: SpaceX Form S-1 filed with the SEC on May 20, 2026; public reporting; Forge Markets pre-IPO secondary trading data

A Note Before We Begin

Several of you have asked me about the SpaceX IPO in recent weeks, and the questions have been getting more frequent as the listing date approaches. I want to share my thinking with all of you at once, in some detail, because this is going to be one of the most visible market events of 2026 and I would rather you hear my view directly than have to ask.

Most of what people know about SpaceX is that Elon Musk owns it and they build reusable rockets that land themselves on barges. Both of those things are true and both of those things matter. But neither of them is the reason the company is being valued at close to two trillion dollars. The actual financial picture is more interesting, and in some ways more concerning, than the public conversation has captured.

This note is longer than my usual commentary because I think the company deserves a proper explanation before any conclusions get drawn. I will walk you through what SpaceX actually does, how it makes money today, what the IPO is asking the market to pay for, and what I am watching as your portfolio manager. I am not telling you what to do. I am telling you what I am thinking.

What SpaceX Actually Is

SpaceX has been a private company for twenty-four years. With the May 20, 2026 filing of its Form S-1 registration statement with the SEC, we have for the first time a comprehensive public view of its financial position. What the filing reveals is that SpaceX today is not really a rocket company in the way most people imagine. It is three businesses operating under one corporate umbrella, and the relationships between them are essential to understanding the valuation question.

The three segments, as the company itself describes them in the S-1:

If you take one thing from this section, take this: the rocket business is not the profitable business. Starlink is. The Falcon and Dragon launch operations that have made SpaceX famous are roughly break-even at the operating line and absorb significant capital to develop the next generation Starship vehicle. The artificial intelligence segment, which was added through the February 2026 acquisition of Elon Musk’s other company xAI, is the largest source of operating losses in the entire enterprise.

This is a meaningful inversion of what most people assume. The reusable rockets exist primarily to deploy and resupply the Starlink satellite constellation that produces the cash. The launch business is the means; Starlink is the end. And the AI segment is a third leg added recently, with very different economics, that the IPO is asking investors to underwrite as part of the package.

Starlink: The Real Business

Starlink is a satellite internet service. It works the way you would expect any internet subscription to work: a customer purchases a small dish, mounts it somewhere with a clear view of the sky, and pays a monthly subscription for high-speed internet access delivered from a fleet of roughly 9,600 satellites in low Earth orbit.

As of March 31, 2026, Starlink had approximately 10.3 million paying subscribers across 164 countries, territories, and other markets. It is available where traditional cable and fiber internet are not, which means it is particularly useful in rural areas, on ships and aircraft, in mobile applications, and in countries with underdeveloped telecommunications infrastructure. The download speeds reported in the S-1 are competitive with terrestrial broadband. The service is real, the customer base is real, and the growth is genuine.

In financial terms, Starlink generated $11.4 billion of revenue in 2025, up about fifty percent from the prior year, and produced operating profit of $4.4 billion at a forty-percent operating margin. In the first quarter of 2026, Starlink revenue was $3.3 billion, up fifty-seven percent year over year, with operating profit of $1.2 billion. These are large numbers and they are growing. Starlink alone, if you isolated it from the rest of the company, would be a substantial standalone enterprise.

Two trends within the Starlink numbers are worth pointing out. First, the subscriber base has approximately doubled in a year. Second, the average revenue per user has declined materially, from $99 per subscriber per month at the end of 2023 to $66 per subscriber per month in the first quarter of 2026. The company is growing the customer base faster than it is growing the per-customer revenue. That tradeoff has been a winning one so far at the segment-profit level because the unit costs of the equipment have declined alongside the revenue, but it is a trend I am watching.

The Space Segment: Famous but Unprofitable

This is the part of SpaceX that most people picture when they think of the company. Falcon 9 and Falcon Heavy are the workhorse rockets that have made SpaceX the dominant provider of commercial and government launch services in the United States. Since 2023, SpaceX has launched more than eighty percent of all mass to orbit globally each year. The reusability of the Falcon 9 first-stage booster, which lands itself either back at the launch site or on an autonomous drone ship at sea, drove the historic reduction in the cost of accessing space. According to NASA figures cited in the S-1, the first version of Falcon 9 in 2010 reduced launch cost to approximately $2,700 per kilogram, roughly eighty-five percent below the prior historical average.

The Space segment also includes Dragon, which is the spacecraft that ferries cargo and crew to the International Space Station, and Starship, which is the next-generation fully reusable super-heavy-lift launch vehicle currently in development at Starbase, Texas. Starship has completed eleven test flights as of the filing date. The company expects Starship to commence payload delivery to orbit in the second half of 2026, meaning it is not yet operational at commercial scale at the time of the IPO.

Financially, the Space segment generated $4.1 billion of revenue in 2025 and lost $0.66 billion at the operating line. The segment funded $3 billion of research and development on the Starship program in 2025 and another $0.93 billion in the first quarter of 2026 alone. Starship is the strategic centerpiece of essentially every long-term growth initiative SpaceX has identified, from next-generation Starlink satellites to lunar missions to orbital data centers. The development cost is substantial and ongoing. The S-1 acknowledges that delays or failures in Starship development would materially affect the broader growth strategy.

The AI Segment: The Recent Addition

In February 2026, three months before filing for the IPO, SpaceX acquired xAI in an all-stock transaction. xAI is Elon Musk’s artificial intelligence company, and it owns the Grok large language model and the X social media platform formerly known as Twitter. SpaceX’s prospectus presents the combined entity in three operating segments, with the newly absorbed xAI business reorganized as the AI segment.

The AI segment generated $3.2 billion in revenue in 2025 and lost $6.4 billion at the operating line. In the first quarter of 2026, it generated $818 million of revenue and lost $2.47 billion. The capital expenditure in this segment is substantially larger than the operating losses suggest, as the company is investing heavily in building large-scale data center infrastructure to compete with other frontier artificial intelligence developers. The full capital deployment picture by segment is in the table below.

The AI segment spent $12.7 billion on capital expenditures in 2025 and $7.7 billion in the first quarter of 2026 alone. To put that in context, the AI segment’s quarterly capital expenditure exceeded the entire annual capital expenditure of the Space segment. This is a company spending money at an extraordinary rate to compete in artificial intelligence, and the IPO is partially structured to fund the continuation of that spending.

The strategic logic the company offers is that artificial intelligence compute will eventually move into orbit, where solar energy is abundant and reliable, and that SpaceX’s launch and satellite manufacturing capabilities position it uniquely to deploy that infrastructure. The company describes a future architecture of orbital data centers powered by space-based solar with connectivity provided through Starlink. The first orbital AI compute satellites are expected to begin deployment in 2028 per the S-1. This is a long-dated, technically ambitious initiative.

The AI segment also includes several other strategic commitments worth knowing about. SpaceX has entered a compute and option agreement with software development company Cursor at an implied equity value of $60 billion, with termination fees totaling $10 billion if SpaceX walks away. SpaceX has announced a chip manufacturing collaboration with Tesla and Intel called Terafab, though the S-1 describes this as a general framework with specific project terms not yet determined. SpaceX is acquiring spectrum licenses from EchoStar to support Starlink Mobile, with closing pending.

Why the IPO Is Being Hyped

SpaceX is asking the public market to value the combined enterprise at $1.75 trillion to $2.0 trillion. If achieved, this would be the largest initial public offering in history by a substantial margin, larger than the prior record-holder Saudi Aramco. The deal is being underwritten by twenty-three financial institutions led by Goldman Sachs, Morgan Stanley, BofA Securities, Citigroup, and J.P. Morgan.

The case being made for the valuation rests on three claims that the company makes prominently in its S-1. First, that the addressable market is unprecedented: SpaceX cites a $28.5 trillion total addressable market across space, connectivity, and artificial intelligence. Second, that the technical capabilities the company has assembled, particularly around reusable launch and satellite manufacturing, are difficult or impossible for competitors to replicate. Third, that the convergence of these capabilities with artificial intelligence creates entirely new market opportunities in orbital compute, lunar economy, and Mars settlement that no other company can pursue at scale.

There are elements of this case that I find legitimate. SpaceX really has built capabilities that did not exist a decade ago. Starlink really is a profitable, growing, dominant business in its category. The reusable launch program really has restructured the economics of an entire industry. The company really is led by a founder with a long track record of building technically formidable enterprises. None of this is empty narrative.

There are also elements that warrant skepticism. The $28.5 trillion addressable market claim includes $22.7 trillion of “enterprise applications,” which is the most speculative line item in the entire estimate and is presented alongside truly enormous figures for digital advertising, AI infrastructure, and consumer subscriptions. Total addressable market estimates of this magnitude are projection exercises rather than committed market share. The company’s own prospectus includes a risk factor stating that these market estimates may prove inaccurate.

And there is the simple fact, which the S-1 makes very clear once you read past the summary, that SpaceX as a consolidated entity is currently operating at a substantial loss. In 2025 the company generated $18.7 billion of revenue and lost $2.6 billion at the operating line, with a net loss of $4.9 billion. The first quarter of 2026 produced $4.7 billion of revenue and a $1.9 billion operating loss. The accumulated deficit on the balance sheet stood at $41.3 billion as of March 31, 2026. Long-term debt was $29.1 billion. The company has put a bridge loan in place and expanded its credit facility in the months leading up to the IPO.

Putting the Valuation in Context

This is where the analysis gets concrete. At the reported IPO valuation range, the implied multiples on the disclosed financials are as follows:

For perspective: the broad S&P 500 index trades at approximately three times sales currently. Large-cap quality compounders that I hold across our portfolios, including names like Microsoft, Visa, and Apple, generally trade in a range of four to twelve times sales. SpaceX at the IPO range would trade at roughly thirty times what we typically pay for high-quality public companies. The price-to-sales multiple of 94 to 107 times consolidated revenue is in the territory of pre-revenue biotech companies and early-stage growth equity. It is not in the territory of operating businesses.

There is also a useful comparison available in the pre-IPO secondary market. Shares of SpaceX have traded in the private secondary market for years, most prominently on a platform called Forge. Earlier this month, the most recent Forge transaction priced SpaceX at approximately $652 per share, implying a total company valuation of approximately $1.55 trillion.

The implied premium of the IPO range over the most recent pre-IPO secondary market valuation is 13 to 29 percent. Pre-IPO secondary market buyers are institutional investors and accredited individuals with access to private market platforms, and they have been transacting in SpaceX shares for years. Their pricing at $1.55 trillion is data, not opinion, and it sits meaningfully below the price range at which the IPO is being marketed.

I do not know what the offering will price at. The book may build above the range, within the range, or below it, depending on demand during the roadshow. I do know that at the price range currently being discussed, the offering is being valued at a meaningful premium to where the same shares were trading in the private market three weeks ago.

Governance Worth Understanding

The S-1 also discloses several governance features that I think clients should be aware of before participating in the offering, particularly if any of you are accustomed to the corporate governance norms of large-cap public companies.

• Dual-class share structure. Public investors will purchase Class A common stock with one vote per share. Elon Musk and certain other insiders will hold Class B common stock with ten votes per share. As a result, Mr. Musk will hold majority voting control of the company following the offering through his combined Class A and Class B ownership.
• Controlled company exemption. Because of the voting control concentration, SpaceX will qualify as a “controlled company” under Nasdaq listing rules and intends to rely on exemptions from certain corporate governance requirements, including requirements relating to board independence and the composition of certain committees.
• Board election rights. Class B holders have the right to elect a majority of the board of directors for as long as any Class B shares remain outstanding. This is a meaningful concentration of board-level control.
• Mandatory arbitration. The company’s bylaws place restrictions on the forum, venue, and procedures for shareholder legal actions, including a mandatory arbitration provision. The prospectus discloses that these provisions could limit shareholders’ ability to pursue certain claims.
• Multiple senior roles held by the founder. Mr. Musk serves simultaneously as Chief Executive Officer, Chief Technical Officer, and Chairman of the board.

None of these features makes SpaceX uninvestable. Several large successful public companies operate under similar structures, including some that have produced excellent returns for shareholders. But these are not the governance norms of the typical S&P 500 company, and they should be understood before capital is committed.

What I Am Watching

Several things would meaningfully affect how I think about SpaceX as a potential investment over the months and years ahead. I am not setting price targets and I am not predicting outcomes. I am telling you the variables that I will be paying attention to.

• Where the offering actually prices. The price range is currently $1.75 to $2.0 trillion. Demand during the roadshow may push that up or down. Where it lands matters.
• Post-IPO trading behavior. Large founder-controlled IPOs with significant insider ownership often experience meaningful price volatility in the weeks and months following the offering, particularly around the expiration of lock-up periods that prevent insider selling during the initial trading period.
• Starship operational milestones. Starship is supposed to commence commercial payload deployment in the second half of 2026. The reliability and cadence of those launches will materially affect the credibility of essentially every long-term growth initiative the company has described.
• Starlink subscriber economics. The decline in average revenue per user from $99 to $66 over three years is a meaningful trend. Whether that trend continues, stabilizes, or reverses will affect how durable the segment economics look.
• AI segment trajectory. The AI segment lost $6.4 billion in 2025. Whether that trajectory moderates, stabilizes, or accelerates as the segment scales will materially affect consolidated profitability over the next several years.
• Public-company reporting standards. SpaceX will issue its first public earnings report likely in September 2026. The reporting cadence, the granularity of segment disclosure, and the consistency of metrics over time will all be informative.

Where I Land

I am monitoring SpaceX with genuine interest. The company is real, the technical achievements are real, and Starlink is a profitable operating business of meaningful scale. I am not dismissive of the franchise. I am also not currently planning to deploy capital from our managed portfolios into the IPO at the price range being discussed, because the valuation as I read it requires several long-dated and capital-intensive initiatives to succeed roughly on the schedule the company describes, and I do not see the margin of safety in that pricing that I look for when deploying client capital.

That is a judgment call, and reasonable people can disagree with it. The Birchwood approach to portfolio construction has always been to own businesses where I can understand what is being purchased, where the price paid is supportable by what the business produces today, and where the long-term reinvestment opportunities the company faces are visible and assessable. SpaceX as a private company has been a remarkable enterprise. SpaceX as a public company at the price range being discussed asks investors to underwrite a scope of ambition and a pace of capital deployment that is unusual even by the standards of large technology companies.

If you have specific questions about how this relates to your accounts, your goals, or your appetite for participating in the offering through your individual brokerage, I would much rather have that conversation with you directly than try to address it in a general note. Please call. I am happy to talk through it.

I will continue to follow the company through the IPO process and into its life as a public reporter, and I will update you if my view changes materially. To that end, we work!

Best, -Justin

Justin Pelletier

Partner: Director of Investments & Strategic Planning

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Important Disclosures

This commentary represents the personal views of the author as Portfolio Manager and Partner of Birchwood Financial Group, as of the date noted above, and is provided for informational purposes only. It is not a recommendation to buy, sell, or hold any security, and it does not constitute investment, tax, legal, or accounting advice. Financial data referenced in this commentary is drawn from the SpaceX Form S-1 registration statement filed with the U.S. Securities and Exchange Commission on May 20, 2026, from related public reporting, and from publicly available pre-IPO secondary market trading data published by Forge Markets. Valuation ranges and offering details are based on reported information and remain subject to change prior to the IPO pricing. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Forward-looking statements are subject to uncertainty and should not be relied upon as predictions of future events. Clients should consult with their Birchwood advisor before making any investment decisions. This commentary should not be relied upon as the basis for any specific investment decision in your portfolio.

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