SpaceX shares surge after Nasdaq IPO as Elon Musk’s valuation tops Amazon and Microsoft

SpaceX just pulled off the greatest feat of financial engineering in history over a week that saw its shares rocket 49 per cent in three sessions after the biggest initial public offer of all time.

Investors should expect more fireworks as Elon Musk’s supporters benefit from his iron grip over Wall Street, alongside an ability to bend markets and institutions to his will.

The hype and aura around Musk saw SpaceX raise $US75 billion at a $US1.77 trillion valuation at $US135 per share by issuing a tiny 4.2 per cent of its total shares on issue to trade freely on the Nasdaq Stock Exchange. On Wednesday, shares eased 5 per cent lower to $US191.50, after hitting as high as $US213.80 in volatile trade.

Musk and his Wall Street partners also handed an unusually large amount, around 20 to 30 per cent, of the shares issued to retail investors, who’ve collectively earned 49 per cent in a week thanks to the soaring stock price.

The trick underpinning the share market performance is the tiny amount of shares issued at the IPO means there’s relatively few available for sale to meet the speculative demand among millions of retail investors.

A stock price doesn’t just fall because a company is overvalued on every financial metric possible. It falls when sellers outnumber buyers.

In SpaceX’s case, the financial engineering behind the float means a sufficient supply of shares to sell doesn’t exist. So investors can be right about the extreme overvaluation, but wrong about the price direction as buyers overwhelm sellers.

Wall Street’s power to sell

Beyond the suits and glitzy skyscrapers, Wall Street’s essential business model is selling. Products, companies, and investments are what it sells best.

In Musk, it has no better salesman for a match made in heaven.

The result is SpaceX rising to a peak $U2.9 trillion valuation higher than Microsoft and Amazon, despite it printing $US4 billion in losses and revenue of just $19 billion last year.

Musk’s spellbinding power even helped persuade the Nasdaq Corporation to abandon its requirement that a company have at least 10 per cent of its shares on issue available to sell to be included in its flagship Nasdaq 100 Index.

The Nasdaq also shortened the length of time a company needs to be listed for index inclusion from three months to just 15 days. This means SpaceX will be included in the Nasdaq 100 Index by July 6 and the world’s biggest passive investors such as Blackrock, Vanguard and State Street will be forced to join the buyers chasing just 4.2 per cent of the company’s shares available for sale.

This is likely to push the shares higher again in what’s arguably a fake valuation given nearly 96 per cent of the company’s shares aren’t even available for sale.

“It’s just not reasonable,” said Dr Brett Wells, a private investor and specialist anaesthetist in Sydney. “They specifically went for scarcity by only putting out 4 per cent of the float, which is ridiculous; nobody puts out 4 per cent of a float. But they’ve power and a gigantic market of investors buying because they don’t want to miss out.”

The likely antidote to the madness is that the IPO has been structured so up to 37 per cent of the free float is set to be drip-fed for sale by insider owners over the next 12 months.

As more supply for sale comes to the market, SpaceX’s valuation might be forced to adjust lower to the real world.

“It’s hard to know, but the (share price) top might be when it gets another bump from the passive money coming in July,” says Dr Wells.

“There’s so much passive money now distorting the process of price discovery you cannot decline to factor it in.

“By November, I think it’ll topple over, as there’s this progressive release of equity and the demand won’t keep up with the sellers.”

Put another way, the SpaceX IPO bidding effect is the same as if two identical apartments on the same Sydney street went for auction on the same day.

One attracts 10 bidders due to great marketing, while the almost identical one down the street only reaches two bidders.

The assets’ market values are the same. But the apartment with 10 bidders achieves a far higher price. This is because the rising bids among different buyers provide them confidence that the asset must be worth more than it is. The investor psychology and marketing success is pushing the price higher, unrelated to its true value.

Professional advisers’ views

In June, professional investment advisory group Morningstar released its views on the business that operates internet service Starlink and the Starship rockets.

“With a small initial float boosted by almost every investment bank on the planet, buoyant investor appetite for AI infrastructure bids, and an unprecedented path to inclusion in the Nasdaq 100 Index just 15 trading days after the IPO, we expect SpaceX’s share price will likely survive separation and even ascend toward orbit, at least for a time,” Morningstar correctly predicted.

The kicker is that Morningstar also thinks the shares are worth just $US63. Some 69 per cent below the $US201 they reached on Thursday.

In a separate report, Morningstar also warns many professional investors are unhappy about the corporate governance of the company.

According to its analyst, Lindsay Stewart, SpaceX’s board is seen as too close to Musk to challenge him, related party transactions raise a concern, and the domiciling of the company in Texas hands more control to Musk - at shareholders’ expense.

A letter from the California and New York Public Pension Funds also labelled the “novel and extreme” governance structure at SpaceX the most favourable to management for a company at scale in history.

“Precisely because SpaceX is… to become, through index inclusion, an unavoidable holding in our portfolios, its governance must at least adhere to the baseline protections upon which long-term institutional capital depends,” the letter said.

SpaceX tipped to eye Tesla

None of this is likely to worry Musk and his supporters getting richer by the day.

The world’s first trillionaire controls 82.4 per cent of the company’s voting power under the terms of the IPO and a licence to execute future mergers or acquisitions.

On Tuesday, SpaceX made its first move by offering $US60 billion of its own shares to acquire AI coding start-up Cursor.

Billionaire US investor Steve Eisman has said he has no doubt that Musk will eventually use SpaceX’s overvalued shares to acquire electric vehicle (EV) producer Tesla. Musk built Tesla into an EV pioneer, but total vehicle sales declined in 2024 and 2025. Since 2019, Musk also boasted Tesla would deliver a fleet of millions of robo-taxis and fully autonomous driving for private vehicle owners, but none of those plans materialised.

“I’m sure he’s going to do it [merge Tesla and SpaceX]” Eisman told CNBC. “If you look at Tesla, the earnings have gone straight down for the last four years, the EV business is just not that great and it’s capital intensive, China now produces EVs much cheaper than Tesla does.”

Any Tesla acquisition by Musk’s SpaceX would also allow him to remove the accounts of the struggling EV business from public eyes.

It would also be another piece of financial engineering to help keep the world’s most remarkable wealth creation show on the road.