Musk’s control fuels SpaceX IPO frenzy despite risks

That exclusivity has paid off. A $10 million stake in 2018 is now worth more than $200 million, as SpaceX prepares to list at a valuation of $1.75 trillion.

Elon Musk’s handling of SpaceX’s long awaited IPO has been unconventional, leaving investors eager to buy shares while paying little attention to the risks.

For years, Musk tightly controlled access to SpaceX stock. Early investors often had to rely on personal connections through relatives, Tesla board members, or Musk’s inner circle just to gain entry. Even then, they were required to visit SpaceX headquarters and undergo interviews with executives including CFO Bret Johnsen before Musk himself gave final approval. Financial disclosures were minimal, with investors often piecing together information from outside sources.

That exclusivity has paid off. A $10 million stake in 2018 is now worth more than $200 million, as SpaceX prepares to list at a valuation of $1.75 trillion. Musk’s approach has carried into the IPO process itself. Banks underwriting the $75 billion offering were told which investors to target, what order sizes to fill, and even signed on without knowing their fees. Nasdaq changed its rules to fast track SpaceX into the Nasdaq 100 index, underscoring the pressure to secure the listing.

Unlike most IPOs, SpaceX has reserved a large allocation for retail investors, amounting to 30 percent of the offering. This means individual buyers will be competing for stock at valuations that leave little margin for error. Analysts warn of serious risks including Musk’s absolute control, weak corporate governance, loss making operations, and speculative ambitions such as colonizing Mars or building data centers in orbit. Yet demand remains overwhelming, with bankers fielding twice the usual number of investor calls.

Critics caution against overlooking these issues. “No fiduciary should accept this adverse combination of financial and governance risk,” wrote Tejal Patel of SOC Investment Group in a June 4 letter to prospective investors. Others argue that betting against Musk has historically been a mistake. As one state treasurer noted, SpaceX’s inclusion in major indexes means large institutions will inevitably own the stock regardless of concerns.

The IPO highlights Musk’s ability to bend Wall Street to his will. By reshaping the traditional process, he has created a frenzy that prioritizes access over caution. Early investors are sitting on vast gains, but for newcomers the risks are far greater. Musk’s track record suggests he will continue to dictate terms long after the stock begins trading.