As I write this, the largest IPO in history is underway. SpaceX, which had targeted an IPO price of $135, closed above $160 on its first day of trading, making Elon Musk the world’s first trillionaire and SpaceX the world’s sixth-largest public company. Talk about a rocket ship!
But something makes this IPO truly special: the sheer amount of retail participation. To put things into perspective, historically, less than 10% of IPO shares were reserved for retail. For SpaceX, that number jumped to roughly 20% with Bloomberg reporting over $100 billion in retail orders delivered.1
While the numbers are staggering, the story is the same. Retail likes expensive stocks that tell a story.
Not long ago, Larry Swedroe wrote one POST it is Laarits and Sammon Retail Habitata paper that explores the pocket in the market where institutions are largely absent. I’ll leave it up to you to read Larry’s paper and post – along with our YouTube video on the subject. But while SpaceX’s IPO was largely reserved for institutions (as most IPOs are), it’s no surprise that retail accounted for such a large number of participation.
According to the paper, stocks with high retail participation are more difficult to value, as they are characterized by (1) higher intangible capital, (2) longer duration cash flows, and (3) greater likelihood of mispricing. The very presence of retail trading introduces noise into pricing mechanisms, preventing institutions from participating and leaving an ecosystem of retail investors scrambling for scraps. And scrap they are, as these stocks seem to be systematically lost.
Using the closing price of $161.11 and SpaceX’s reported earnings in their SEC filings, the company currently trades at roughly 113 times earnings.2 We may not know what the price of SpaceX will do. Maybe it becomes part of the retail habitat, maybe not. But as a group, we know what tends to happen with growth stocks, loaded with longer-duration cash flows that are difficult to estimate. SpaceX could very well end up as an outsider who beats the odds, and I hope they do.
However: investor beware.
Source: Laarits, Thomas and Sammon, Framework, The Retail Habitat (04 October 2024).
Photo by SpaceX on Unsplash.
- Hughes. Kniazhević. Lipschultz. “SpaceX IPO said to attract more than $70 billion in retail orders.” BloombergJune 11, 2026. https://www.bloomberg.com/news/articles/2026-06-11/spacex-ipo-said-to-draw-more-than-70-billion-in-retail-orders. ↩︎
- Space Exploration Technologies Corp., Form S-1 Registration Statementfiled May 20, 2026, US Securities and Exchange Commission, EDGAR, https://www.sec.gov/Archives/edgar/data/1181412/000162828026042639/spaceexplorationtechnologi.htm. ↩︎
Why Retail Loves SpaceX: A conundrum with a long history and predictable ending originally published in Alpha Architect. Please read the Alpha Architect FINDINGS at your convenience.
