SpaceX IPO: Mission Exit has liftoff

My phone has not stopped. The texting and phone calls have been blowing up my phone for the past month, weeks leading up to today’s historic first trade date. Some clients and prospects have been dialing in asking the exact same question: "How do I get in on SpaceX - can you get me in?" As if Monarch Wealth Management, LLC has some backdoor way to get client money into a pre-IPO launch - lol. Surprise, surprise; we don't!

It’s understandable, who wouldn't want to bet on Elon. I wouldn't want to be on the other end wagering against him. That has not proven to be very profitable. Musk’s aerospace behemoth represents the final frontier of tech investing. With a revolutionary model that promises to drastically cut the cost of space exploration, the allure is undeniable. But as a wealth advisor, it is my job to cut through the noise, strip away the fascination, and look at the cold, hard numbers. So many people get caught up with the fear of missing out (FOMO).

While the sentiment is overwhelmingly bullish, I am firmly in the camp that buying on day one is rarely the best entry strategy. Today’s IPO isn’t just a chance for you to buy; it is a massive liquidity event designed to let early investors, who bought in years ago with strict lock-ups and restrictions, finally cash out at massive multiples. That's understandable, these people have had their money sitting there for years without a dime and without any reassurance that their investment would amount to anything. Heck, most privately owned companies with ambitious hopes and dreams are just that. I've seen clients invest in pre-IPO's over the years and most go belly up. Every now and again a whale comes to life. Most of these depend on the company and their path to profitability. Let's look into why patience is your greatest asset today.

The Liquidity Illusion: Who is Actually Winning

When a highly anticipated "unicorn" goes public, the media focuses on the retail demand. But IPOs are fundamentally capital-raising and liquidity events. That means that early investors need people to invest later on to get their money out and unlock the gains. Venture capitalists, early employees, and private equity backers have had their capital tied up for years, often a decade or more. They have pent-up demand for liquidity and are sitting on astronomical returns. By buying on the open market on day one, retail investors are essentially providing the exit liquidity for these whales. To understand what happens to stock prices when early insiders begin to realize their gains, we only need to look at the ghosts of IPOs past. Obviously none of these companies are similar to a Musk run company or have any relatable qualities of SpaceX, but history can teach us a lot.

The 15-Stock Reality Check

Let's look at some of the most recognizable, highly anticipated IPOs of the past decade. Names like Uber, Airbnb, Coinbase, and Snowflake all debuted with massive fanfare. But what happened to intra-year returns for those who bought the hype on the first day of trading?

The chart above tells a humbling story that most won't share. Almost universally, high-growth tech and disruptive companies experience a severe "day one curse." The initial pop is followed by drawdowns ranging from 45% to over 90% within the first 12 to 24 months. Purchasing on the first day historically exposes capital to extreme volatility and extended underwater periods.

The META Comparison: The Dip Before the Rip

Does a post-IPO crash mean the company is a failure? Absolutely not and I hope the message you take from this is NOT a negative on SpaceX or Elon. The guy is brilliant. He's different for sure, but nobody can doubt his intelligence, passion and drive! He is literally second to none. To put SpaceX's potential trajectory into perspective, we must look back at one of the most defining tech IPOs in history: Facebook (now META). When META went public in 2012, the hype was deafening. But those who bought at the IPO price of $38 were quickly punished as the stock plummeted to below $18 in the ensuing months amid concerns about mobile monetization and profitability. Ouch!

META eventually figured out its monetization strategy, pivoting aggressively into mobile ads, and the rest is history. SpaceX is facing a similar fundamental challenge. They have incredible top-line growth, but space exploration is unfathomably capital intensive. Whether or not SpaceX will achieve sustained profitability will only come to fruition over time.

By the way, fun fact, I was probably one of the last adopters of Facebook of all my friends and family. As a matter of fact it took me about three weeks to have my account finalized. I needed to upload a photo of my drivers license and supporting documentation to prove that I was who I claimed to be. I asked others and almost nobody else had to do this. Perhaps Facebook thought there was no way a mid-forty year old could have opted out of joining for so long. Anyhow, that's neither here nor there.

SpaceX Financials: Growth vs. The Bottom Line

Comparing year over year growth versus year over year losses paints a picture of a company scaling at breakneck speed but burning cash to do so. Cashflow and cashburn is a big deal when it comes to survival. Our financial models suggest that while revenues will continue to compound, the heavy capital expenditures required for Starship and Starlink infrastructure will keep the bottom line under pressure.

The "Retail Tranche" and the Index Fund Trojan Horse

This IPO is structurally unique. You've heard this one before, but this time is different. SpaceX has allocated an unprecedented 30% to retail investors. Wow, sounds generous right? While many hail this as a democratization of finance, let's be pragmatic: it is banking heavily on faithful investors and their potential FOMO. It relies on faithful investors getting blinded by fascination and the allure of following anything Elon touches. It happens all the time with regular stocks, but Musk has a cult like following with his various products like Tesla, X and other brands. I see the same is true with Apple or Google products. Don't ever try to get an Android user to switch to IOS or vice versus.

The Index Fast-Track: Musk negotiated a unique pathway with the NASDAQ for this

listing. SpaceX may be added to major indices much sooner than standard IPOs. Is that good or bad or a non-event and what does this mean for you? It means millions of people will inadvertently buy SpaceX shares simply by holding passive index funds, target-date mutual funds, or contributing to their 401(k)s. Yes, that's right, hate it or love it, you may be buying the stock sooner than you realize without intending to. The forced buying from institutional passive funds will create a price floor down the line, but it also means you don't necessarily have to rush to buy individual shares today to gain exposure.

My Verdict and Strategic Action Plan

SpaceX is undeniably a generational company with a promising long-term forecast. It's got a pretty cool CEO that's either hated or loved by most - depending on the day. However, as an investment entry point, today represents maximum risk. I cannot willfully recommend aggressive day one buying to my clients and the masses. If you absolutely must own a piece of the company today to satisfy that itch, here is the prudent approach:

Keep it Small: Limit your initial allocation to a speculative sleeve of your portfolio or a comfortable amount you decide on with your financial advisor. Use Limit Orders: Do not buy at "market" on opening day. I cannot stress this enough. It does NOT cost money to place limit orders and it could save you from a costly mistake. If you're not sure what that is or how they work, reach out and I'll help understand. Volatility will cause wild swings.

Set strict limit orders at valuations you are comfortable with.

Dollar-Cost Average (DCA): If you want a $10,000 position, buy $1,000 today, and spread

the rest out over the next 12 to 24 months. As the lock-ups expire and early investors take

profits, you will likely get opportunities to average down into much more attractive valuations. The universe is vast, and there is plenty of time to participate in the space economy. Don't let the first day FOMO dictate your financial flight path and entice you to deviate from your plan.

Everyone wants to offer advice. We hope you have the right person—a trusted partner to guide you on your path to achieving your goals. If you're feeling uncertain about how the current political and economic landscape is impacting your portfolio, reach out to us at Monarch Wealth Management. Let's schedule a consultation to ensure your wealth strategy is built to weather the storm.

Don't forget that you'll need a smart way to save, invest, and grow so you can enjoy all your hard work and the fruits of your labor. Make a conscious investment in yourself and watch some tips from my PennyWise Financial Podcast, where I discuss a lot of the topics in this blog post.

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