5 reasons why we did not buy SpaceX at its IPO

Periodically, an investment manager must make a controversial call on a popular investment.

Indeed, Delta Wealth Management did not buy SpaceX stock (NASDAQ ticker: SPCX) for any of our clients’ investment portfolios on June 12 — the day of the company’s historic initial public offering. 

So why not?

This is what I told my clients about the logic behind my decision:

1. Dilution risk is high

This is an old Wall Street trick to enhance value. At the IPO, only 4% of the shares became available to the public and institutions to purchase this groundbreaking company. 

What most investors fail to understand is that Elon Musk now can issue large blocks of shares and dilute the initial valuation (your ownership) without losing management control. As he sells more shares at later dates, the investor’s initial valuation gets diluted.

In other words, your stake loses value.

Do not look past this initial strategy of creating false scarcity to enhance the initial value (what investors pay at the IPO).

2. Unrealistic initial valuation 

Based on the initial $1.8 trillion valuation, this company is being valued at approximately 90 times sales. That’s sales — not earnings. 

To give you a comparison, when I bought Nvidia for my clients’ investment portfolio years ago, I paid 10 times forward sales.

Is SpaceX, on its public offering date, nine times more valuable than a well-established, proven leader in chip production with proven technology?

My answer right now is no!

3. Cash burn

IPO investors bought a company that lost more than $5 billion in the first five months of 2026. I do not believe this spending will stop.

So how will SpaceX raise the funds needed to continue this pace? You guessed it — by either selling more stock, thus diluting your ownership, or, worse yet, going into the public markets to borrow it. 

Either way, this is will be a negative event for shareholder value.

4. Execution risk

You do not want to buy a company on Day One with an unproven delivery of service. 

While everyone in the public market believes that Elon Musk is a one of the great business innovators of our time (I certainly hold this opinion), SpaceX has been valued as if it already has a cost-effective operation in space. 

Please go back to the early days Tesla. It didn’t reach operating efficiency for several years — and it had the advantage of gravity and oxygen. SpaceX is not that fortunate!

5. Insider selling window

Do not ignore the unique feature of this offering.

Usually, Wall Street bankers make insiders wait six months to one year to sell their initial award of shares. However, SpaceX insiders can start selling their shares as soon as August — just two months after this offering. Depending on initial price action of this stock, look for a lot of insider selling in August!

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If you have any questions about this decision or how we accomplish our investment objectives, please feel free to reach out.