SpaceX Is Why You Don’t Invest In An IPO - Forbes

Personal FinanceSpaceX Is Why You Don’t Always Invest In An IPOByErik Sherman, Forbes contributors publish independent expert analyses and insights. Erik Sherman reports on business, economics, finance, tech, and law.Follow AuthorJul 20, 2026, 09:46pm EDTJul 21, 2026, 10:23am EDT--:-- / --:--This voice experience is generated by AI. Learn more.This voice experience is generated by AI. Learn more.SummarySpaceX's IPO experienced a classic trajectory: an initial surge from $150 to over $211, then a sharp decline to $125, exemplifying common post-offering volatility. Companies typically go public to raise capital for expansion and offer liquidity to early investors. However, initial market euphoria often gives way to price corrections, a pattern also observed in Facebook's IPO. The article notes growing skepticism regarding the return on investment for heavily hyped technologies like AI, despite massive spending, as many firms struggle to realize substantial value. This underscores the inherent risks of IPOs, advocating for diversified investment strategies over chasing singular, high-stakes payoffs. A SpaceX Falcon 9 rocket carrying the Starlink 10-54 mission lifts off from Space Launch Complex 40 at Cape Canaveral Space Force Station in Cape Canaveral, Florida, on June 12, 2026.AFP via Getty ImagesSpaceX’s first month of trading has been a textbook example of what often happens after a blockbuster IPO: early euphoria, a sharp run‑up, and a fast return to earth. The stock opened at $150 on June 12 and climbed to $160.95 by the end of the day. Within four days, shares surged past $200, closing at $211.39 — the kind of early pop that makes IPOs look irresistible. Almost immediately, the stock began to slide, closing at $154.60 on June 22. Then an up‑and‑down pattern that, by July 20, opened at $125.33. We’ll see where it closes today. Not to pick on SpaceX, but it is a prime example of what can happen. Below is a graph. Not all the figures are in place, but there are enough to show how prices changed. SpaceX stock price over timeErik ShermanNot every stock after an IPO crashes like this, but it’s not unusual to see significant dips in stock performance after the public offering. There are two major goals for an IPO. The most important is to raise money for the company. The business needs cash to expand, pay for more resources, build a war chest for future competitive struggles, invest in strategic initiatives — all the things one might expect a young company to do with money for expansion and building success. However, the money that goes to the business comes from the initial purchases from investors who are “friends and family” (including the friends, family and good clients of the involved investment bankers). Perhaps some people manage to grab shares early when the IPO opens, but generally the lowest prices are for the chosen, who get access to the released pool of shares. Then there is the second goal of the venture capitalists and other pre-IPO investors who have shares they’re cleared to share — part of the original investment deals. The IPO opens a liquidity opportunity for those investors and perhaps some early employees, although many face a lock-up period before they can sell. If the company and its representatives do a good job in promoting the organization, including all the hype that PR has helped generate, demand will be far heavier than the supply of stock available. That drives up the price. The process doesn’t always work to satisfy both goals. When Facebook, now Meta, went public, many factors combined to limit the market response on the first day. On that first day in 2012, the offering price was $38. The price at close was $38.23. It kept falling from mid-May through June and July. By Aug. 20, the share price was $20.01. But by the end of the year, it climbed to $55. On the other hand, it’s not unusual to see share prices surge and then return to earth. "Historically, major IPOs have tended to have a good deal of volatility over the first 12 months," Sam Grelck, an equity strategy analyst at Truist Advisory Services, a unit of Truist Financial, told CBS News in June, before the SpaceX IPO. "Even those that have performed well in many cases have tended to have pretty significant drawdowns at some point." There is also sometimes buyer’s remorse or a reconsideration of whether all the hype was worthwhile. The biggest money-making part of the company turned out to be Starlink, the satellite Internet subsidiary. The biggest hope was probably SpaceXAI, trumpeting the promise of generative artificial intelligence. Doubts about whether it will show the promised results have been growing. Yet companies are pouring vast amounts of money into data centers and expensive software from the likes of OpenAI and Anthropic. Where does it end? And when do the revenues from all the software and hardware finally catch up to the outpouring of money? This sounds like the original Uber playbook: get people dependent on a new service, starve other options and, when there is little competition, push up the charges and make money. It took Uber years to finally reach regular profitability. That was with the advantage of evidence that people will pay for transportation. Will individuals and large corporations keep shelling out for access to these systems, even if they aren’t getting enough return on investment? The Harvard Business Review collected statistics from various sources suggesting that only 5% get substantial value at scale. And there’s a growing number of vendors competing for the available customer dollars. The draw of IPOs is the thought of a big return from one investment. Hoping for a large payoff isn’t necessarily as smart an investment as a set of more careful, diversified investments that also provide risk management.