SpaceX stock (SPCX) is trading near its $135 IPO price after a post-IPO surge faded. History shows that large tech IPOs tend to outperform the market over three years, but SpaceX's extreme valuation and lockup risks warrant caution.
Historical IPO Performance Gives Mixed Signals
Data compiled by professor Jay Ritter shows that the average IPO since 1980 (excluding the dot-com bubble) returned 44.2% from its offer price over three years, trailing the market by 1.6%. However, tech IPOs performed significantly better, delivering average three-year returns of 73.3% and beating the market by 25.8%. For large tech companies with sales over $100 million (inflation-adjusted), the average three-year return jumped to 82.5%, with an excess market return of 43.1%. Even unprofitable large tech IPOs outperformed by 41.7% on average.
SpaceX fits the profile of a large, high-revenue tech company. Its IPO raised over $85 billion, making it the largest in history, with a valuation around $1.75 trillion. CEO Elon Musk's ambitions in reusable rockets, satellite broadband, and AI underpin the long-term thesis. On the surface, history favors SpaceX.
Valuation and Lockup Risks Temper Optimism
Despite the positive tech IPO track record, SpaceX's valuation raises red flags. Its price-to-sales ratio exceeds 90, an extreme level. A University of Florida study of IPOs since 1980 found that only 14 other IPOs had over $100 million in sales and a P/S ratio above 40. Those stocks averaged a mere 3.1% return over three years, underperforming the market by 15.4%. High valuation has historically correlated with poor returns.
Another concern is the looming expiration of lockup periods. SpaceX floated only about 5% of its shares in the IPO, meaning a huge volume of insider shares could hit the market in the coming months. While the same study found that companies with smaller floats tend to outperform, no company of SpaceX's size has ever had such a large locked-up stake. The market may struggle to absorb that supply.
The Bottom Line: History Offers Limited Guidance
SpaceX is an unprecedented IPO — the largest ever, with a sky-high valuation and an enormous overhang of locked shares. Historical averages provide only a rough framework. Ultimately, the stock's fate hinges on whether SpaceX can deliver results that exceed the already lofty expectations baked into its price. For investors considering buying below $135, the historical data suggests caution, especially given the valuation hurdle.