SpaceX 1.75 Trillion IPO Deep Dive: When the Largest Listing in History Is Automatically Stuffed Into Your Index Fund

On June 12, 2026, SpaceX will list on Nasdaq (ticker: SPCX) at a valuation of approximately $1.75 trillion, raising as much as $75 billion in an offering led by Goldman Sachs and underwritten by more than 20 investment banks. Whether measured by valuation or funds raised, this will be the largest initial public offering (IPO) in the history of human capital markets, far surpassing the 2019 Saudi Aramco record of approximately $29 billion.

For the vast majority of investors, this is not an active choice of "whether to buy." Due to a Nasdaq index rule revision effective May 1, 2026, SpaceX will automatically enter the Nasdaq 100 Index on its 15th trading day (roughly July 6). This means any investor holding the QQQ ETF tracking that index, or a retirement account benchmarked to it, will passively become a shareholder in Musk’s Mars colonization plan without casting a single vote or even reading the prospectus. This article seeks to answer only one core question: When you passively hold SpaceX, what exactly are you holding?

1. Green, Gray, Red: Three Financial Destinies in One Company

The simplest framework for understanding SpaceX is to break it down into three businesses with distinctly different colors: Green is the true cash-cow business, Gray represents core assets slowly bleeding cash, and Red denotes the new businesses hemorrhaging cash. Public attention is mostly drawn to the halos of Green and Gray, overlooking the rate of blood loss in the Red segment.

The Green business is Starlink. As of March 2026, it has deployed approximately 9,600 satellites in orbit, covering 164 countries and regions, with paid subscribers surpassing 10.3 million. This is a high-quality asset that markets would scramble for under a reasonable valuation: full-year 2025 revenue was approximately $11.387 billion, up nearly 50% year-over-year; EBITDA, reflecting core profitability, grew by 86.2% year-over-year; and operating profit in the first quarter of 2026 alone reached $1.188 billion. In the satellite broadband niche, Starlink is a near-monopoly.

Starlink's expansion ambitions are far from over. During its IPO preparation window, SpaceX spent approximately $17 billion to acquire EchoStar's radio spectrum portfolio, covering key bands such as AWS-4 and H-block; when including roughly $2 billion in debt interest support, the total economic burden approaches $190 billion. The acquisition targets the next-generation technology Starlink Direct-to-Cell—which allows standard smartphones to connect directly to satellites without external accessories. This business received FCC approval on May 12, 2026. Spectrum is scarce and non-renewable; locking in key bands early creates another moat for Starlink.

However, structural warning signs have emerged even in the healthiest Green business: Average Revenue Per User (ARPU) continues to decline, dropping from approximately $99 in 2023 to about $80 in 2025, and further to roughly $66 in the first quarter of 2026—a cumulative decline of about one-third over three years. While the subscriber base is expanding, the paying power per unit is being diluted. As Starlink expands into emerging markets and faces competitors like Amazon's Kuiper, this downward trend is unlikely to reverse in the short term. Starlink is currently SpaceX's only "ATM"; all other departments are essentially consuming the cash flow it generates.

So, where is this cash flowing? The first to swallow cash is the Gray business—space launches. This is the source of SpaceX's reputation: approximately 650 cumulative launches with a mission success rate of about 99%. Falcon 9’s reusability technology redefined the cost of reaching orbit. But the devil is in the details: in 2025, SpaceX completed 165 Falcon 9 launches, of which only 43 served external commercial customers; the remaining 122 were used to deploy its own Starlink satellites. More than 70% of its capacity is actually internal logistics for Starlink. The aerospace department lost $657 million for the full year 2025, primarily because Starship R&D consumes about $3 billion annually, with cumulative investment exceeding $15 billion.

A key fact needs to be flagged here, which will reappear at the end: although Starship has completed 12 flight tests, it has yet to successfully deliver even a single commercial payload as of the filing of the prospectus. This seemingly technical detail is, in fact, the physical foundation of the entire $1.75 trillion valuation narrative.

If the Gray business is merely bleeding slowly, the Red business is hemorrhaging. This Red segment refers to xAI.

2. The $250 Billion xAI Acquisition: Valuation Controversy and Regulatory Vacuum

xAI is the artificial intelligence company founded by Musk in 2023, which was absorbed by SpaceX in an all-stock transaction in February 2026, making it the largest private-sector M&A in history. This merger left a staggering mark on the consolidated financial statements: in 2025, xAI's capital expenditures reached approximately $12.7 billion, exceeding the combined $8 billion of Starlink and the rocket launch business; in the first quarter of 2026, capital expenditure alone consumed about $7.723 billion. Weighted down by xAI, SpaceX recorded a net loss of $4.94 billion in 2025 and another $4.28 billion in the first quarter of 2026, with cumulative losses climbing to $41.3 billion—a scale unprecedented among large IPOs over the years.

The result is intriguing: for every dollar a Starlink user pays for internet access, while appearing to support a global communications revolution, a significant portion is actually being used to train the Grok chatbot under xAI. The cash flow from communication infrastructure is being used to fund a capital-intensive AI arms race.

Is xAI's valuation reasonable? To clarify this, one must first reconstruct its valuation path. In just about a year, xAI's valuation climbed steadily from approximately $800 billion: in January 2026, in a funding round of about $20 billion led by genuine external investors like Nvidia and Qatar's sovereign wealth fund, the valuation reached about $230 billion; when it was merged into SpaceX in February 2026, it was valued at approximately $250 billion. The real participation of external capital suggests this is not a "selling to oneself" magic trick pulled out of thin air by Musk.

But the real issue with the valuation is not the absolute number, but the horizontal benchmarking. SpaceX’s AI division (including the X platform) had 2025 revenue of approximately $3.2 billion, meaning a $250 billion valuation implies a Price-to-Sales (P/S) ratio of about 78x. By comparison, Anthropic, also in the top tier of AI, has an annualized revenue of about $45 billion, with its approximately $900 billion valuation corresponding to a P/S ratio of about 20x. In other words, using the same AI story, the unit revenue premium investors are paying for xAI is about four times that of Anthropic—despite xAI's revenue scale and commercialization significantly lagging behind the latter.

Whether the valuation is reasonable is open to debate; however, one thing is almost indisputable: there was a significant regulatory vacuum throughout the process of SpaceX acquiring xAI. In this February 2026 transaction, the seller was the Musk-controlled xAI, the buyer was the Musk-controlled SpaceX, the board that signed off was Musk-controlled, and even the law firm that issued the fairness opinion has Musk himself as a long-term client. In a standard public market related-party transaction, such a "common control transaction" would require review by an independent board committee, a vote by minority shareholders, and strict disclosure requirements from the SEC. But because SpaceX was still a private company at the time of the transaction, almost all of these protective mechanisms were bypassed.

The transaction utilized a "triangular merger" structure, allowing xAI to maintain its status as a wholly-owned but legally independent subsidiary after being folded in. Officially, this was to isolate the litigation risks of the X platform, but another effect was that no external shareholders had a say in the entire acquisition process—buying the revenue while isolating the lawsuits, all completed without oversight. This is precisely the kind of company investors are about to buy into.

3. The Musk Empire's Internal Financial Loop: Layered Related-Party Transactions

If the valuation and regulatory vacuum fall into a debatable gray area, the content revealed in the "Related-Party Transactions" section of the prospectus touches the core of corporate governance and is the most important part of the document to study word-for-word.

First, let's look at a seemingly impressive external contract. In May 2026, SpaceX signed a cloud services agreement with Anthropic for $1.25 billion per month, running through May 2029. Under the agreement, Anthropic will lease the entire Colossus 1 data center, covering about 300 megawatts of power and roughly 220,000 Nvidia GPUs; this contract could bring over $40 billion in revenue to xAI. On the surface, this is a major victory for SpaceX's computing business—even competitors are renting its power. However, three details in the contract warrant scrutiny: first, it includes a 90-day bilateral termination clause rather than a long-term commitment, contrasting sharply with industry-standard cloud contracts that run five to ten years; second, Anthropic already has massive computing orders with Amazon AWS and Google TPU, yet it still leased all of Colossus 1 for inference, which indirectly suggests xAI has a serious computing surplus; third, Musk publicly attacked Anthropic as "evil" on the X platform just months ago, yet is now paying it $1.25 billion monthly. Taken together, these points suggest the contract is more of a cash-flow arrangement designed to beautify the AI division's books.

Supporters will point out that this cash flow supports capital expenditures for Starship and orbital AI, making it a reasonable business arrangement. This defense has merit, but it cannot hide xAI's product weaknesses: the flagship model Grok continues to lag in programming capabilities, so much so that SpaceX had to use a $60 billion acquisition option plus a $10 billion breakup fee just to acquire the coding capabilities of the AI tool Cursor.

What is truly alarming are the related-party leases with Musk's close associates. Antonio Gracias is one of Musk's closest friends, having lent him $1 million in 2008 when Tesla was on the brink of bankruptcy. His fund, Valor Equity Partners, holds about 7.3% of SpaceX, making him the second-largest individual shareholder after Musk; Gracias himself is set to join the SpaceX board. According to interpretations of the prospectus by Reuters and Fortune, a SpaceX subsidiary affiliated with xAI signed multiple equipment lease contracts with Valor for a total obligation exceeding $20 billion to lease GPU equipment. The payment pace is particularly concerning: SpaceX disclosed that it paid about $885 million under these arrangements for the full year 2025, while paying approximately $857 million in just the first two months of 2026—a payment acceleration of about sixfold within a year.

The accounting treatment of these leases is also intriguing. SpaceX originally planned to record them as off-balance-sheet liabilities, but was forced to reclassify them as "failed sale-leasebacks," resulting in billions being added to the balance sheet as related-party debt, with the creditors being funds owned by a company director and these obligations guaranteed by SpaceX or its subsidiaries. Translated into language that ordinary investors can understand: after SpaceX goes public, for every share you buy, you simultaneously become a guarantor for this related-party debt. This capital has made a full circle, flowing from the future capital of public investors into the fund of Musk's best friend. Robert Willens, an accounting expert at Columbia Business School, told Fortune that while the prospectus used standard protective language like "terms no less favorable than those from non-affiliated third parties" for transactions with Tesla, it omitted this phrase when describing the Valor leases—"They know when to say it and when not to."

Gracias is only the first exit for this internal financial loop. The second exit leads to another Musk company: Tesla. According to Tesla's SEC filings, SpaceX purchased about $143 million worth of Cybertrucks from Tesla in 2025, paying the Manufacturer's Suggested Retail Price (MSRP) without any bulk discounts. A Morningstar analyst told Business Insider that most companies get discounts for bulk purchases, but SpaceX did not; "this kind of phrasing will make investors raise an eyebrow." Vehicle registration data from S&P Global Mobility provides a more precise picture: in the fourth quarter of 2025 alone, SpaceX purchased 1,279 Cybertrucks, accounting for about 18% of all Cybertruck registrations in the U.S. that quarter; if other Musk-affiliated entities like xAI, Boring Company, and Neuralink are included, the share is nearly 19%. Tech media outlet Electrek calculated that if SpaceX's purchases were excluded, Cybertruck's fourth-quarter sales would have plummeted about 51% year-over-year. The actual data shows Cybertruck sales dropped from 38,965 units in 2024 to 20,237 units in 2025—even with SpaceX's support, they still fell about 48% year-over-year.

The Cybertruck is just the tip of the iceberg. Tesla’s SEC filings show that in 2025, companies controlled by Musk contributed a combined $573 million in revenue to Tesla; since 2023, this cumulative figure is about $890 million. Additionally, xAI procures energy storage batteries from Tesla, while Tesla in turn directly invested about $2 billion in SpaceX. Connecting these transactions reveals a clear closed loop: cash earned by SpaceX is funneled to Tesla; Tesla’s supported sales volume pushes up its stock price; the stock price sustains Musk’s personal wealth; and that wealth is then used to invest back into SpaceX and xAI. The cash of the entire Musk business empire circulates internally. Once SpaceX goes public, passive investors will become the final external source of funding to join this closed loop.

4. Nasdaq’s Rule Revision: Technical Neutrality or Questionable Timing?

Before the prospectus was officially released, a group of professional institutional investors had already expressed strong dissatisfaction. In May 2026, the California Public Employees' Retirement System (CalPERS)—the largest public pension fund in the U.S., managing about $525 billion in assets covering retirement savings for police officers, firefighters, and nurses—joined with the Comptrollers of New York State and New York City, together representing over $1 trillion in assets, to send a joint letter to SpaceX.

The letter singled out several of SpaceX's "rules to protect Musk," calling them "the most management-friendly governance structure in the history of the U.S. public markets." One of the sharpest points targeted the core design of SpaceX's charter: as a mathematical matter, Musk can only vote to fire himself. This is because, under the charter, only Class B shareholders with super-voting rights have the power to remove the CEO, and those voting rights are held by Musk himself. It should be emphasized that this is not criticism from social media, but a formal protest from trustees managing $1 trillion in assets.

However, there is a fundamental impotence to this protest: it has almost nothing to do with whether ordinary investors buy SpaceX. Because passive index funds mechanically buy according to index methodology rules, the personal opinions of trustees do not apply to whether a stock is included. Institutions can protest, but as long as SpaceX enters the index, funds tracking that index must buy. And the rules of the game themselves were modified two months before the IPO.

On March 30, 2026, Nasdaq announced revisions to the Nasdaq 100 Index methodology, effective May 1. The core change was the introduction of a "Fast Track" mechanism: newly listed companies can be included in the index on the 15th trading day after their IPO as long as their market capitalization ranks among the top 40 current components, whereas they previously had to wait three months to a year. This "seasoning period" was originally designed to ensure price stability and sufficient price discovery. Accompanying revisions included removing the previous minimum free float requirement and establishing a 3x float-adjusted market cap cap.

Objectively speaking, Nasdaq has technical defenses for these revisions: the Fast Track has precedents in the S&P 500, and the float cap is actually used to "limit" rather than "amplify" the weight of a single component. But the key issue is not the rules themselves, but the timing of the revision. A group of ultra-large tech companies like OpenAI, Anthropic, and SpaceX are waiting to list, and their common characteristic is founder control with extremely low free float. A Reuters report pointed out more directly that rapid index inclusion was one of the conditions for SpaceX agreeing to list on Nasdaq rather than the New York Stock Exchange. For a benchmark index tracked by trillions of dollars globally, the neutrality of methodology is the cornerstone of its credibility, and this revision has objectively shaken that cornerstone.

The market consequences of this revision are massive. Currently, the flagship ETF tracking the Nasdaq 100—QQQ—has a scale of about $450 billion, and the entire index ecosystem (including various index funds, derivatives, and structured products) has associated assets exceeding $1.4 trillion. Multiple institutions estimate that SpaceX’s inclusion in the index will trigger forced buying of approximately $22 billion to $27 billion from ETFs and index funds, with the broader ecosystem's total buying scale being even higher. For historical context: it took about seven months for Facebook to be included in the index after listing, about one year for Airbnb, and about three years for Tesla, while SpaceX will only take 15 trading days. This massive difference in inclusion speed is the most direct manifestation of the rule revision’s effect.

5. A Nearly $1 Trillion Compensation Package: The Highest Ever, and No One Voted

Even if becoming a passive shareholder is a foregone conclusion, investors still face an unprecedented compensation structure. In January 2026—about five months before the company's official IPO, and before external shareholders even had a chance to read the prospectus—the SpaceX board granted Musk a performance-based stock compensation package. If all performance conditions are met, the maximum payout value could reach approximately $1 trillion, the largest executive compensation arrangement in the history of public markets. According to the joint letter from CalPERS and other institutions, the plan reportedly did not go through the normal process of an independent compensation committee.

The unlock conditions for the pay package are extremely aggressive. The first part consists of 1 billion restricted Class B super-voting shares, which unlock if SpaceX's market capitalization reaches $7.5 trillion and a permanent colony of at least 1 million people is established on Mars. The second part, about 60.4 million shares, is tied to other market cap targets and the operation of orbital data centers. For comparison, Apple's current market cap is about $3.5 trillion; for SpaceX to reach $7.5 trillion, it would need more than double Apple's valuation while simultaneously building a million-person colony on Mars—a combination of goals spanning commercial, engineering, and civilizational scales.

This plan is fundamentally different from Tesla's 2018 compensation package. The latter was about $56 billion, approved by a shareholder vote, and was once ruled by a Delaware court to have procedural flaws (a decision reinstated by that state's Supreme Court in December 2025). SpaceX's nearly $1 trillion plan is far larger and was granted before the IPO, giving no external shareholders the opportunity to vote.

Why grant it before the IPO? The core reason is to evade shareholder oversight. Since the unlock conditions are almost impossible to achieve in the short term, its current expense is recorded as zero under accounting standards, which does not hit financial profits; however, Musk can immediately exercise the super-voting rights of these shares, receive dividends, and even use them as collateral for financing. Before the performance is achieved, control and liquidity benefits are realized in advance. Musk is bound to SpaceX for life, and passive investors are therefore bound to Musk's personal will for life.

6. The Physical Premise of the $1.75 Trillion Narrative: A Rocket That Just Exploded

All the aforementioned financial structures, governance arrangements, and index maneuvers ultimately rest on one premise: there must be a rocket that can actually be used reliably. This brings us back to the foreshadowing in the first section.

SpaceX has invested over $15 billion in the Starship project, but as of the filing of the prospectus, it has yet to successfully deliver a single commercial payload. Why is this fact so critical? Because SpaceX’s $1.75 trillion valuation corresponds to a P/S ratio of about 94x—meaning its market value is 94 times its annual revenue. For comparison, Palantir, the company with the highest P/S ratio in the S&P 500, is only at about 67x. SpaceX’s 94x is higher than any company in the S&P 500.

The core narrative supporting this extreme P/S ratio is orbital AI data centers. The prospectus proposes deploying 100 gigawatts of orbital computing power annually, requiring the transport of approximately 1 million tons of material to orbit each year, with plans to begin deploying solar-powered space-based AI computing satellites starting in 2028. This level of annual capacity can only be achieved by a fully reusable Starship; the Falcon series is physically incapable of the task. In other words, a significant portion of the premium in the $1.75 trillion valuation is a bet on a technical vision that has yet to be engineering-validated.

And Starship currently cannot operate reliably. In May 2026, Starship conducted its 12th flight test, which was also the first flight of the V3 version. The result: the spacecraft successfully reached space, but the engines subsequently failed; during the re-entry phase of the return flight, a central Raptor engine exploded, causing multiple adjacent engines to fail, and the ship eventually made a hard landing in the Indian Ocean. CNN’s headline for the test flatly characterized it as "ending in an explosion," while Musk himself claimed on the X platform that the test showed "major improvements." Regardless of the phrasing, the objective fact is: this rocket—the physical foundation of the entire $1.75 trillion narrative—currently has a status of exploding and being unable to reliably carry commercial payloads.

This constitutes a clear binary outlook. If Starship succeeds, V3 satellites can be deployed, the orbital AI vision can advance, the astronomical conditions of the pay package may be met, and the $1.75 trillion valuation has a story; if Starship fails, V3 satellites cannot be deployed, orbital AI becomes a pipe dream, the pay package will never be paid out, and the entire narrative supporting the 94x P/S ratio collapses. The entire $1.75 trillion story currently rests on a rocket that just exploded.

What Exactly are You Betting On?

When an index fund buys SpaceX for you, you are buying far more than just an ETF. You are buying Musk's Mars dream, the related-party debt guarantees for the Gracias fund, the procurement magic behind Cybertruck sales, a rocket that still explodes, and a nearly $1 trillion compensation plan tied to a million-person colony on Mars.

It must be stated fairly: this is not a scam. Musk is indeed one of the few entrepreneurs in this era truly changing the physical world; Starlink is an excellent business, and Falcon 9 is a genuine engineering miracle. If Starship succeeds, orbital AI becomes reality, and xAI can compete effectively with OpenAI, the $1.75 trillion valuation might actually be a bargain. Techno-optimism has a solid basis in this company.

But at the same time, this is undoubtedly a highly leveraged gamble. For the past twenty years, investors always had the choice of "whether to become a Musk shareholder"; this time, Nasdaq's rule revision has made that decision for them in the passive portfolios of tens of millions of people. This is the most profound point: it is not about whether Musk is great, but about whether an individual—no matter how brilliant—should be allowed, in the absence of public oversight, to embed an unprecedented high-risk gamble into the foundational structure of global passive capital through layered related-party transactions, governance terms, and index maneuvers.

For investors who wish to retain autonomy, there are two actionable directions. First, review retirement accounts and ETF holdings; if Nasdaq 100 exposure exceeds 3% to 5% of total assets, consider diversifying into broader indices like the S&P 500. Second, if planning to buy SpaceX directly, consider waiting until after the wave of forced buying triggered by index inclusion subsides—historical experience shows that the prices of newly included components are often distorted in the first 90 days by mechanical buying from passive funds.

You can certainly choose to believe in this gamble. But at the very least, before it is added to your portfolio, you should know exactly what you are betting on.