In Greek mythology, a boy named Icarus was given wings made of wax and feathers. Thrilled by the power of flight, he ignored repeated warnings from others and flew too close to the sun. His wings eventually melted, and he fell into the sea.
“Let me warn you, Icarus, to take the middle way, in case the moisture weighs down your wings, if you fly too low, or if you go too high, the sun scorches them.” -Ovid (Metamorphoses)
For centuries, the story has served as a reminder. Too much enthusiasm and pride, paired with a habit of ignoring warnings, can lead to your downfall. Being ambitious is a good thing, but it should be balanced with a dash of caution and good sense.
Investors have seen this lesson play out again and again throughout market history. With SpaceX recently going public, it may be happening again.
Get Rich by Getting in Early?
Every generation runs into its own version of the “once-in-a-lifetime” investment.
In the 1800s, railroad stocks were huge. In the late 1990s, internet startups saw their heyday. More recently, investors have chased electric vehicles, AI, and private tech companies.
For decades, investors have faced the same temptation: get in early and cash in on huge gains.
The appeal of an IPO is certainly understandable. Look at the extraordinary growth seen in companies like Amazon and Apple. It’s hard not to imagine what could have been if you’d bought on day one and held for decades.
When a private company first lets the public buy in, it feels like the guaranteed start of the next great growth story. IPOs create the impression that everyone can take part equally, but the process rarely works in the average investor’s favor.
How IPOs Actually Happen
When a company decides to go public, it hires investment banks to underwrite the offering. Those banks play a key role in setting the offering price and handing out shares to investors before trading begins.
The most attractive shares go to the banks’ largest clients, hedge funds, and other favored investors. By the time the average investor can buy shares through a brokerage account, the stock has already begun trading. Even in that short window, the price has likely moved a lot.
Historically, IPOs have produced strong first-day gains. Between 1980 and 2024, the average IPO rose nearly 19% on its first day of trading.1 Those headline-grabbing moves certainly generate excitement. But the benefit mostly goes to big institutional investors who bought shares at the original offering price. Those buying after the opening bell aren’t so lucky.
Some newly public companies go on to become huge successes. But many struggle to meet the lofty expectations built into their early valuations. In fact, IPOs as a group have historically done worse than the broader market over the three years after their debut.2
The excitement around a new public company often lasts far longer than the returns it delivers to shareholders. The immediate winners are usually the insiders selling shares, the banks collecting fees, and the big institutional investors who get early access.
What About SpaceX?
To be perfectly clear, none of this is meant to take away what SpaceX has accomplished.
Under Elon Musk’s leadership, the company has transformed the economics of space travel, pioneered reusable rocket technology, and built Starlink into one of the world’s largest satellite internet networks. Few companies in modern history can claim a similar record of innovation.
In this context, we’re not debating whether SpaceX is a remarkable company. Rather, does it make a compelling investment at IPO?
On its opening day, SpaceX raised $75 billion—tripling the previous world record. The new stock, SPCX, rose nearly 20% and hit a $2 trillion market cap. That made it one of the largest public companies in the country overnight.3
When Great Companies Become Expensive Stocks
It’s fair to assume that a great business automatically makes a great investment. History suggests that’s not always the case.
SpaceX investors are paying an extraordinary price for extraordinary expectations. Even the most impressive businesses can become poor investments when you buy them at prices that already assume near-perfect outcomes.
Some challenges we foresee with SpaceX stock include:
Satellite Technology Remains Limited in Its Advancements
Starlink remains an impressive business, particularly for rural and underserved areas. Satellite internet, however, still faces natural limitations. In crowded cities, fiber networks usually offer faster speeds, lower lag, and lower costs. Starlink could still grow a lot. But even successful businesses have practical limits on how many customers they can reach.
Financial Transparency Is in Question
SpaceX’s recent merger with xAI makes it harder for investors to judge how the core businesses are doing on their own. When the numbers get harder to read, careful investors should slow down.
Governance Considerations
Elon Musk is expected to keep overwhelming voting control in SpaceX. That leaves public shareholders with little say over major company decisions. Anytime one person holds that much power over a public company, investors should weigh the risks that come with weak oversight.
The Lesson?
Many of the best investments of the past several decades were purchased after the initial excitement faded—not during the height of it.
We have no doubt that SpaceX could potentially become one of the defining companies of this century. It may even prove to be an excellent investment someday.
That said, the best time to invest in a standout company like SpaceX isn’t necessarily when enthusiasm and expectations are at their highest. Icarus did not fail because he lacked courage—in fact, he had plenty of it. He failed because he showed no discipline and left no margin for error. Investors would be wise to remember the difference.
Sources
1 Initial Public Offerings: Updated Statistics
2 Don’t Let IPO Buzz Cloud Your Judgment
3 SpaceX Had the Biggest IPO in History. That Doesn’t Mean You Should Buy the Stock.