Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Thursday. Today is Thursday, March 26th.
Today I'd like to talk about SpaceX.
I've been getting a lot of questions from members about the upcoming IPO, including one yesterday from Cindy B. — a good friend of ours who got into a serious accident a few months back and has been going through rehab and treatments. I know she's feeling better because she asked me about SpaceX. So Cindy, this one's for you.
By all accounts, SpaceX is going public this summer — somewhere between a $1.25 and $1.75 trillion dollar valuation. Big, big numbers. So let me walk you through the four questions I'd ask myself before touching this one.
Question one: What is SpaceX today?
For most of its 24-year history, SpaceX made money launching things into space for governments and other companies. If you've read the Walter Isaacson biography on Elon Musk, you know that of all the remarkable things this man has done, SpaceX might be the coolest — because he went to the government and said, don't just hand us a fat contract, pay us for performance, pay us if we actually deliver. That changed everything about private space.
But in the past few years, the business shifted. SpaceX started using its own Starlink satellites to beam internet to subscribers, and that has now become its biggest revenue driver. And now that it's merged with Musk's xAI, the vision is something even bigger — a space communications and AI behemoth that will power a computing revolution with data centers in space. We'll see if that happens, but I would never bet against Elon Musk. That's just not a smart thing to do.
Question two: What does the business actually generate?
I look at every company the same way, whether it's a hot IPO or a boring industrial stock. If somebody asked me to pay $1.25 trillion for a private business, the first thing I'd want to know is what it earns. So here are the numbers.
SpaceX, before the xAI acquisition, was generating $16 billion in revenue in 2025, $8 billion in EBITDA, and $1 to $2 billion in free cash flow. Those are genuinely impressive numbers — 50% EBITDA margins is a remarkable business. Very, very attractive.
xAI, on the other hand, was acquired at a $250 billion valuation, generated about $210 million in its first nine months, and lost $9.5 billion in that same period. So when you put them together, xAI actually wipes out SpaceX's profits entirely. The $9.5 billion in losses exceeds the $8 billion in EBITDA that SpaceX generated. That's going to be tricky for Elon to navigate — he's essentially added a bleeding asset into one of the best businesses he's built. Again, I wouldn't bet against him. But it's a real dynamic that any serious investor needs to understand.
Question three: How strong is SpaceX's grip on the launch business?
This is where it gets interesting. Out of 59 total rocket launches into orbit so far in 2026, 35 have been on SpaceX's Falcon 9. Over half of all orbital launches. That's a meaningful grip on the industry. But here's the thing — the total worldwide value of the launch business itself is somewhere between $10 and $20 billion. Even if SpaceX captured 100% of that market at 50% margins, you're looking at $10 billion in EBITDA. That is still a trillion dollar valuation for $10 billion in earnings. And remember, they're still absorbing those xAI losses on top of it.
Question four: Is the market ready for SpaceX?
SpaceX is pulling out all the stops to gin up demand for its shares. The company is considering splitting the IPO between institutional and retail investors, with Morgan Stanley and Goldman handling institutions while Bank of America and Citibank focus on individual investors. So if you have a brokerage account at either of those banks, it might be worth talking to your representative about how to get access to shares — if the valuation doesn't scare you.
And look, I get it. Sometimes these things just trade higher regardless of fundamentals, and there is something genuinely fun about betting on Elon Musk. The man is a modern-day Howard Hughes. Visionary, brilliant, impossible to fully predict. That doesn't mean I think this is a great bargain at $1.25 trillion. But I would never short it either.
A Honda Accord might be a great car. That doesn't mean it's worth $200,000.
That's all I have for today. Have a wonderful day. I'll see you tomorrow.
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