Key Points
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Elon Musk’s SpaceX confidentially filed to go public about a month ago.
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SpaceX is reportedly targeting an IPO valuation of as much as $2 trillion.
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Jim Cramer recently highlighted some risks about the structure and narrative around SpaceX’s IPO.
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As the longtime host of CNBC’s Mad Money, Jim Cramer is known for delivering fast-paced stock picks, market commentary, and colorful rants to his audience every night. Although his reputation is mixed, investors pay attention because Cramer’s endorsements often spark buying frenzies while his warnings can trigger sell-offs.
I’ll admit that Cramer has an eye for spotting sentiment extremes and structural risks. That said, his advice alone should never be a substitute for independent analysis of business fundamentals, valuation, and risk tolerance.
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Cramer’s recent cautionary take on the planned SpaceX initial public offering (IPO) caught my eye. He brought up some interesting topics that I think are being overshadowed by the hype surrounding Elon Musk’s space empire. Let’s explore what Cramer has to say.
Image source: Getty Images.
Will SpaceX stock go to the moon?
Cramer’s primary concern revolves around the structure of the SpaceX offering. Numerous media reports peg SpaceX’s target IPO valuation at $1.75 trillion to $2 trillion. Although this would immediately make SpaceX one of the most valuable companies in the world, Cramer argues the real danger lies in the offering’s float — the sliver of shares that are actually made available to the public.
If underwriters release only a small percentage of the company’s total shares outstanding to satisfy retail and institutional demand, SpaceX stock could detach sharply from any reasonable valuation fundamentals. Cramer thinks there is so much hype around the offering that SpaceX could reach a valuation of as much as $6 trillion shortly after the IPO. For reference, that would make SpaceX more valuable than Nvidia (NASDAQ: NVDA), at about $5.4 trillion.
Although such a forecast may seem dramatic, the math is simple: supply-and-demand economics. Pent-up excitement about SpaceX — including exposure to Starlink, X (formerly Twitter), and xAI — could collide with an artificially constrained supply base. The result, Cramer argues, is not efficient price discovery but rather a frenzied first-day pop engineered for spectacle.
What risks come from investing in the SpaceX IPO?
Cramer also suggests that the SpaceX IPO could be a catalyst for a wave of mega-tech debuts — including OpenAI and Anthropic — each carrying multihundred-billion-dollar price tags. Since the stock market is ultimately about supply and demand, flooding it with several new issues at the same time forces eager investors to sell existing holdings to participate in new offerings. These dynamics result in downward pressure on the broader market.
Just look at the recent Cerebras Systems (NASDAQ: CBRS) IPO as a potential preview: Blockbuster demand crowds out other growth names and distorts capital flows as the company’s shares surged nearly 70% on the first day of trading.
On top of these concerns, smart investors need to keep lock-up expirations in mind. Standard lock-up agreements typically prevent insiders and employees from selling their shares for 90 to 180 days after a company goes public. When that window opens, however, a huge block of shares could hit the market. If the initial float is deliberately kept small to maximize a pop, the eventual excess supply shock could be severe.
Is SpaceX’s valuation justified, or is it a bubble stock?
Unlike many relics of the dot-com era, SpaceX generates tangible revenue from reusable rocketry and satellite broadband. Although I won’t dismiss the company’s valuation outright, I share Cramer’s concern that SpaceX stock could quickly become detached from its fundamentals if scarcity-driven bidding drives the market cap to unjustifiable levels.
In my view, Cramer is actually right to sound the alarm on the potential structure and sentiment surrounding the SpaceX IPO. Of course, he is not the final word on whether SpaceX stock is investable. The wiser path for most investors is to exercise patience: Let the initial froth settle, monitor the dynamics of lock-up expirations, and evaluate the business on its operating merits rather than opening-day performance.
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Adam Spatacco has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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