Young & Invested: Is SpaceX the wealth machine that investors have been waiting for?
The record-breaking IPO has sparked a wave of excitement and accompanying products, but history tells a different story about the long-term prospects.
Mentioned: Space Exploration Technologies Corp Class A (SPCX)
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Edition 68
Nothing gets retail investors sprinting towards their brokerage apps faster than something that promises to revolutionise everything. Of course, what I’m referring to is last week’s launch of SpaceX, officially marking the largest IPO in history. Few things in my time have generated the kind of anticipation we’ve seen so far.
But there’s undoubtedly a large gap between the story and financial reality. It’s especially relevant here because the fundamentals behind SpaceX look very different from the narrative markets are buying into.
The company is currently deeply unprofitable and posted more than USD 4 billion in net losses for first quarter 2026. A substantial portion of the valuation markets are ascribing to the business is tied to its AI ambitions, which are not only early, but unproven and entail competing against far more established players.
In a time where it appears the market are willing to pay a premium for anything AI-adjacent, the timing raises a few brows (mine, at least). This enthusiasm is not limited to SpaceX. OpenAI and Anthropic are also preparing to list, meaning several high‑profile companies betting on the same thing are choosing the same moment to go public.
So, could this the next 100‑bagger? Am I going to be sitting on Mars in 50 years, pretending this was obvious in hindsight? Maybe. And of course, somewhere out there, an ETF issuer is already crafting up a factsheet explaining why their product is the perfect way to cash in on the trend.
The details
SpaceX is effectively three companies in one. Its Starlink segment is profitable and growing quickly. The launch services business is also profitable and expanding at a steadier pace. However, the AI division is loss-making and burns enormous amounts of cash, yet accounts for the majority of the company’s valuation.
In another era, investors would have valued the business on financials for the rockets and satellites, with AI as a speculative add‑on. But we are well past that. Instead, the IPO is being sold primarily as an AI opportunity, because that is where the market’s enthusiasm currently sits.
How do IPOs usually perform?
High profile IPOs have a habit of drawing attention, but history shows the level of excitement they generate rarely lines up with the return investors see over a longer period.
Long‑run performance of US IPOs has been extensively documented by economist Dr Jay Ritter, otherwise referred to as “Mr IPO”. Ritter’s dataset spans over four decades and is particularly useful for anyone who watched SpaceX soar 20% on day one and thought they’d missed the boat to effortless riches.
Ritter’s latest data covers 9,253 operating‑company IPOs from 1980 to 2024 with returns calculated through December 31, 2025. The chart below demonstrates one of his findings. When returns are measured from the offer price (Panel A), the average IPO looks like a terrific wealth‑creation event. But when returns are measured from the first closing price (Panel B) e.g. the point where most investors can actually buy shares, the results don’t appear as promising.
The theme is remarkably consistent across market cycles. IPOs tend to exhibit strong initial price performance then spend the next three years underperforming the market. The average first-day return for IPOs from 1980-2024 is 18.9%, similar to what SpaceX experienced.
Tech IPOs in particularly, look particularly strong on day one with an average 31.2% jump versus 12% for non‑tech. But measuring long-run returns from the initial offer price inevitably inflates long‑run returns. On average, Tech IPOs had a 3-year buy and hold return of 50.1% vs a market‑adjusted return of 15.6% (CRSP value‑weighted index).
But once you we remove the first‑day sugar high and measure performance from the first close, (the price retail investors get), tech IPOs fall to a 3-year buy and hold return of 21.8% and a market‑adjusted return of -12.7%.
I am acutely aware that torturing historical data long enough will give anyone the answer they’re looking for. I think the SpaceX = bad argument is slightly lazy. But the full study shows the pattern is not the result of creative framing, rather we see it show up across decades, sectors and market cycles.
The obvious response to this data is that SpaceX is not just any IPO, and of course that would be true. But a company can be exceptional without being an exceptional investment opportunity. As shown below, the timing of entry can be crucial to your outcome as a buy and hold investor.
Figure 1: Table 16(F) Aftermarket Returns with and without Including the First-day Return. Source: Initial Public Offerings Updated Statistics. February 2026. Jay R. Ritter
A word of caution for the ETF investor
Since the ASX doesn’t offer direct access to SpaceX, exposure will largely come through funds. One of the recent discussions has centred around the side effects of the IPO and what it may imply for ETF portfolios.
Contrary to popular belief, a company does not automatically enter a major index simply based on size. Newly listed companies generally meet requirements around liquidity, trading history and investability before they are added. This process can take months, however with several mega-cap IPOs on the table this year, index committees are reassessing how quickly they should add companies that arrive at enormous scale on day one.
Indexes follow fixed rebalance schedules, yet some also contain exceptions for unusually large or highly liquid listings. These exceptions act as a form of fast-track entry to capture new companies before the next scheduled rebalance.
For most broad‑market investors, the impact will be gradual and even then, influence will depend on weight relative to hundreds of other companies. Thus, the conversation naturally shifts to thematic ETFs and their ability to fast-track and ramp up exposure to what the market is demanding.
One of the more reliable signals that a theme has reached peak excitement is when fund providers start trampling over each other to launch adjacent products.
We’ve already seen evidence of space and AI-themed funds launched into the market hoping to capitalise on retail interest. But you’d be hard pressed to argue this sudden enthusiasm is driven by a deep, long‑standing passion for orbital infrastructure. However, even as a vocal critic of thematic ETFs, the appeal is undeniable. Surely this time it’s different.
The challenge most investors face is that their hopes of outperformance rarely come to fruition. Many thematics tend to launch at moments when the underlying theme has already rallied sharply. On the back of SpaceX’s launch, AI is clearly the flavour of the year.
Investing in a thematic ETF is always a gamble on a chain of assumptions lining up in your favour. Even in the case of SpaceX, these do not change.
The first is that you have correctly identified a long‑term theme before everyone else. If a thematic ETF already exists, the market has usually caught on. By the time SpaceX has been added to half a dozen “space innovation” products, the idea that you’re early to the theme becomes optimistic at best. Furthermore, long-term investors who don’t want to constantly rotate in and out of positions also need to be right that the theme will last longer than the hype cycle surrounding the IPO.
The second assumption is that you have chosen the right fund, because the track record here is not encouraging. Research has shown, many thematic ETFs have been closed or merged out of existence. And only a small fraction have both survived and outperformed (10% in the 15-year period to June 2024). What are the realistic chances you have picked the successful one? Given the track record, this may be a bet that few investors are willing to take.
The third assumption is that the investment will be profitable. The market often prices in the promise of a theme long before the profits arrive. This leads to higher valuations and lower future returns. Thematic ETFs also tend to launch after the initial gains have already happened, which means investors are paying for the story rather than the fundamentals.
SpaceX may well become a defining company of the next decade, but that does not automatically make every space‑themed ETF a winner. The structure of thematic funds means you are not just betting on SpaceX. You are betting on the theme, the timing, the index rules, the fund design and the fee drag. That is a lot of moving parts for something being sold as a simple way to get exposure.
