The Bull Case for SpaceX Starts With Not Buying It Today

SpaceX shares plummet from IPO highs as experts warn that extreme valuation and limited public float create significant downside risks for early investors.

Just a few weeks after SpaceX's record setting public debut, investors chasing the stock's early momentum may want to slow down. "I would not buy it now. I personally would be patient," Mike Dickson, Head of Research & Quantitative Strategies at Horizon, said in an interview with AInvest's Capital & Power. "I fully expect that after some of these kind of short-term dynamics... we're gonna have better opportunities from a price perspective in the future."

Dickson's comments build on research he published before SpaceX's IPO, in which he cautioned investors that enthusiasm surrounding the company could overshadow the realities of valuation, limited public float and the historical trading patterns of large technology IPOs. His latest assessment comes after SpaceX shares surged as high as $225 following their $135 IPO before retreating to roughly $156, illustrating the volatility he anticipated. Reuters reported Friday that the stock has experienced sharp swings as investors digest its valuation while major equity indexes prepare to add the shares.

According to Dickson, one of the biggest risks is valuation. He noted that the company is "valued like a space company," with a price-to-sales multiple that is dramatically higher than those of the broader market, while most of its current revenue comes from Starlink's satellite internet business rather than its longer term artificial intelligence ambitions. "It's tough to make a lot of money paying a hundred times revenue for a stock," he said.

Dickson also pointed to the unusually small percentage of shares initially made available to public investors. Only a fraction of the company's total equity currently trades in the public market, creating what he described as a demand squeeze that helped drive the initial rally. As insider and institutional shares gradually become eligible for sale, he expects additional supply to weigh on the stock.

"There was a lot of people that want it. There's not a lot of supply available," Dickson said. "The reverse is gonna happen when these new shares come to market... that is downward pressure on the stock price, not upward pressure like we had right out of the gate."

That view aligns with recent market developments. Index funds tracking the Russell indexes are expected to purchase billions of dollars of SpaceX shares as the company joins major benchmarks, while future additions to other indexes could create further trading swings. Reuters also noted that only a small portion of SpaceX's overall equity currently trades publicly, a structure that can amplify price volatility.

Despite his caution, Dickson emphasized that his concerns are about valuation rather than the quality of the business itself.

"It is something that is worth very much paying attention to," he said. "I think it's a great company, but... you can still be wrong by buying a great company by just paying the wrong price." He added that "the patient investor could potentially get in at some cheaper prices over the next six to twelve months as some of these shorter term dynamics kind of work themselves out."

For investors evaluating whether to buy SpaceX after its volatile debut, Dickson's message remains largely unchanged from his pre-IPO research: the long-term story may be compelling, but patience could prove just as valuable as conviction.