Why the SpaceX IPO Will Be Good, Bad, and Ugly for Other Space Stocks

In 2026, Elon Musk is proposing an initial public offering (IPO) for SpaceX. The IPO, when and if it happens, won't make it the biggest company in the world. At $1.5 trillion in presumed market capitalization, a newly public SpaceX will still lag multiple tech companies in value -- Alphabet, Apple, Nvidia, and Microsoft, to name just a few.

By at least one measure, though, a 2026 SpaceX IPO is likely to be the biggest one in history. Musk reportedly hopes to raise as much as $50 billion, eclipsing Saudi Aramco's 2019 IPO, which raised "only" $29.4 billion.

Everyone seems to have a theory about how the IPO will play out. I actually have three such theories. (One or more of them might even be correct.)

Image source: SpaceX.

The good: The IPO will shine a spotlight on space stocks

So does this make SpaceX the world's biggest IPO ever, or doesn't it? However you answer that question, one thing is certain: It will be the biggest news in space investing this year, and it's going to draw a lot of attention to space stocks.

That's not to say investors aren't already excited about space. Over the past 12 months, shares of companies including Rocket Lab (NASDAQ: RKLB), AST SpaceMobile (NASDAQ: ASTS), and Planet Labs (NYSE: PL) have gained 150% to 250%, vastly outpacing the S&P 500's 14% gain.

But just a few months ago, SpaceX sponsored a secondary stock offering that valued the company at $800 billion. If the IPO goes off as forecast, though, that $800 billion valuation is likely to nearly double in under a year. That's going to draw a lot of attention from momentum traders.

A $1.5 trillion valuation, furthermore, would value SpaceX at more than 60 times sales. If investors accept this as the right valuation for a space stock, it's going to make a lot of other such stocks look awfully cheap in comparison. For example, companies like Firefly Aerospace (NASDAQ: FLY) and Planet Labs, each costing less than 30 times sales, are going to look very buyable.

And a company like Redwire (NYSE: RDW), which costs 5 times sales, or Spire Global (NYSE: SPIR), at 4 times sales? They're going to look downright cheap.

The bad: SpaceX will still be king of the hill

All that said, there's a world of difference between a tiny space company like Spire and the dominant space behemoth that is SpaceX. The IPO could turn this gap into a yawning chasm.

Take another look at the numbers up above: $1.5 trillion in market cap and $50 billion in new cash raised. This IPO is going to generate a mountain of money, and management will quickly put that cash to work.

Musk has explained his IPO decision by saying he needs to raise cash quickly to pay for putting artificial intelligence (AI) data centers into orbit, where they can soak up the sun, generate electricity from free solar power, and dump their waste heat directly into colder-than-ice deep space, saving on cooling costs. To be clear, there are significant technical challenges that still need to be resolved to make this ambitious plan a reality, which also have to be priced into the plan.

And $50 billion in cash will give the company much-needed funding to help it complete development of its Starship reusable mega rocket, and to perfect the process of refueling spaceships in orbit. It will also help fund the latest efforts in the Starship Human Landing System (i.e., a lunar lander) that he's building for NASA.

And it will undercut the launch costs of every other rocket company. Once SpaceX goes public, it's going to be very hard for anyone else to catch up.

The ugly: SpaceX might cause a sell-off in space stocks

That's why what might be my most controversial opinion on the IPO might also turn out to be the most accurate:

While SpaceX going public at a $1.5 trillion market cap seems to imply that other space stocks should cost a lot more, it might also convince investors that these other stocks are actually worth a lot less. After the IPO, the other space stocks will all have to compete with an even more unstoppable SpaceX with its fingers on the pulse of every aspect of space investing -- and swimming in cash to pay for it.

I predict that the SpaceX IPO will suck all the oxygen out of the space (pun intended). Investors who made money with second-tier space stocks in 2025 are less likely to buy more of those shares and more likely to sell them to raise cash to invest in the SpaceX IPO.

What's more, that might even be the right decision.

Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends AST SpaceMobile, Planet Labs PBC, Redwire, and Rocket Lab. The Motley Fool has a disclosure policy.