With SpaceX expected to go public on June 12, 2026, and with OpenAI and Anthropic also reportedly eyeing IPOs this summer, many investors are asking the same basic questions: What is an IPO? Why do companies do them? And how risky are they? Stephen Foerster, Finance professor at Ivey answers these questions and more in this edition of Ask the Experts.
Ivey Impact: What is an IPO?
Stephen Foerster (SF): An initial public offering, or IPO, is a major step for a company because it marks the move from being privately owned to being publicly traded. In SpaceX’s case, the plan is to go public on June 12th by listing on the Nasdaq exchange at a share price of $135. For investors, that shift matters because it opens the company to public shareholders for the first time and begins a new phase in how the business is owned, valued, and followed.
Ivey Impact: Why does a company have an IPO?
SF: The main reason a company goes public is to raise capital. When a firm launches an IPO, it sells shares to new investors so it can put that money back into the business, expand operations, and ideally create more sales and profits over time. Issuing stock is costly in one sense because the company is giving up some future upside, but it also avoids the need to borrow heavily and commit to interest payments. In SpaceX’s case, the company is expected to raise about $75 billion, which would be the largest IPO ever by a wide margin. The plan is to use that money to pay off about $20 billion in short-term debt, invest further in Starlink (a satellite internet constellation), support launch programs such as Starship (a reusable super heavy-lift rocket), and build out its AI business.
Ivey Impact: How risky is it to invest in an IPO?
SF: Any stock investment carries risk because there is no guarantee a company will succeed in the future, and investors can lose money if the business falters or fails. IPOs tend to be even riskier because they are typically younger companies with shorter track records. SpaceX was founded in 2002. While it does have a 24-year track record, it remains far younger than companies such as Coca-Cola, which has been a public company for more than a century. Another concern is profitability. IPO companies are often still in an earlier stage of development and may not yet have stable earnings or even any earnings. In SpaceX’s case, the company was profitable in 2024, earning just under $800 million, but then lost $5 billion in 2025. That kind of swing is a reminder that investors in IPOs are often buying into a future story, not a settled business.
Ivey Impact: Does the SpaceX valuation seem expensive?
SF: By traditional measures, SpaceX does look expensive. One common way to value a stock is to compare its price with its earnings from the past year. Historically, U.S. stocks have traded at roughly 17 to 18 times trailing earnings. But that measure does not work well when a company is losing money, as SpaceX is now. In those cases, investors often look instead at price-to-sales, which compares the company’s market value with its revenue. As a reference point, when Spotify went public in 2018, it was also still losing money, but it traded at about six times sales. At SpaceX’s proposed IPO price of $135, the company would trade at roughly 94 times sales. On that basis, the stock appears very expensive.
Ivey Impact: Are these IPOs made available to retail investors?
SF: Usually, retail investors get only limited access to IPO shares, if they get any at all. In this case, however, the plan is to set aside 30 per cent of the shares for retail investors, which is more than usual. Investors who do not receive shares in the IPO will have to wait until the stock begins trading in the open market. That matters because IPO prices often jump on the first day of trading. On average, that first-day “pop” is about 15 per cent, which means investors who do not get in at the offering price may end up paying meaningfully more.
Ivey Impact: What else should investors know?
SF: An investment in SpaceX depends on several big bets. The most important may be the bet on the company’s founder, Elon Musk himself, who is expected to control almost 83 per cent of the voting power. That means the usual governance protections investors might expect will be limited, and Musk will have enormous freedom to run the company as he sees fit. Investors are also betting on the company’s AI ambitions, where it will face competition from major players such as OpenAI and Anthropic, and on the much longer-term question of whether space ventures, including the vision of inhabiting Mars, can become reliably profitable. For all the excitement around a high-profile IPO, the basic rules of investing still apply: stay diversified and invest with a long-term view.
Stephen Foerster is a Professor of Finance at Ivey Business School, where he has taught since 1987. A CFA charterholder, he has taught Financial Management, Investments, and Portfolio Management courses in the School’s HBA, MBA, and Executive MBA Programs. Foerster is the author of several books, including Trailblazers, Heroes, and Crooks: Stories to Make You a Smarter Investor, has published extensively in leading academic and practitioner finance journals, and is the recipient of numerous teaching and research awards.
