Stock Talk - SpaceX IPO: What We Learned. The Real Story is Investor Expectations

Episode Date: August 5, 2026

What if one of the greatest companies ever built turns out to be a disappointing investment? In this video, I explain why this isn’t really a story about SpaceX—it’s a story about investor expectations, IPO hype, and the price you pay for even the most extraordinary businesses. Drawing on more than 35 years of investment experience, I compare today’s excitement around SpaceX to past market favorites like Amazon, Tesla, and the dot-com era, and show why great companies don't always make great stocks. If you're considering investing in high-profile IPOs or simply want to become a more disciplined long-term investor, this is a lesson you won't want to miss.   Stock Talk is a weekly vlog/podcast dedicated to discussing the Oak Harvest Financial Group Investment Team's perspective on what's happening in the market. Hosted by Chief Investment Officer Chris Perras, each episode brings you our views on stocks, the market, and the economy with a little education thrown in for good measure. Listen each week and help stay connected to your money!   Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free visit: https://click2retire.com/lets-connect   Important disclosures: Content of Oak Harvest podcasts expresses the views of the speaker and is for informational purposes only. Oak Harvest believes that any data, articles, or information cited are reliable at the time of creation, but does not warrant any information contained herein to be correct, complete, accurate, or timely. References to third-party analysts should not be seen as an endorsement of their views or recommendations, and you should do your own research before investing. The views and opinions expressed herein may change without notice. Strategies and ideas discussed may not be right for you, and nothing in this podcast constitutes personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities. Indexes such as the S&P 500 are not available for direct investment and your investment results may differ when compared to an index. Any specific portfolio actions or strategies discussed will not apply to all client portfolios. Investing involves the risk of loss, and past performance is not indicative of future results.

Good evening, everyone. Welcome back to Stock Talk. Welcome back Eric. This week's topic is SpaceX and its recent IPO. But before we begin, I want to make something very clear. This isn't really a story about SpaceX. It's a story about investor expectations. It's a story about IPO investing and getting caught up in the swirl or excitement of what's hot. I've been managing money for about 35 years. Charles and our investment team probably close to 40 between the five Oak Harvest Investment Team members, we've seen a lot of economic and investing cycles in our lifetimes. We've learned one lesson that has probably saved us more money than any valuation model. A great company doesn't automatically make a great stock. These are quite two different things.

In fact, many of history's greatest companies have also been terrible investments. If you bought them at the wrong price, say Cisco in 2000, Amazon during parts of the dot-com era, its stock declined around 95% before finding its stock. footing becoming the company in stock. It's become Tesla after periods of tremendous enthusiasm, and today, perhaps, SpaceX. This isn't about criticizing innovation for the company. How many jobs has Elon Musk created in his business lifetime versus me? I know that's an easy question to answer. We all know who wins that award. SpaceX might become one of the greatest businesses ever created, and hopefully public shareholders, it becomes one of the rare, multi-decade stock return

compounders. Because the question investors should always ask is, am I paying too much for a business? Because in investing, expectations often matter more than excitement. Let's begin with valuation. Less than two years ago, private transactions valued SpaceX at less than $350 billion. Less than a year before the IPO, private investors valued it at less than half its IPO value. And just months before the IPO, the merger with XAI established another valuation reference point of roughly Lastly, $1.25 trillion. Then came the IPO. By agreeing to price the IPO with a predetermined $135 a share, public market investors valued

the combined company at $1.77 trillion. And shortly after, when the stock traded over $200 for a share for a few days, the market capitalization approached $2.5 trillion. Think about that. The businesses didn't become five times better in 18 months. The expectations became five times bigger. At roughly 20 billion of annual revenue, investors were paying more than 100 times sales, not earnings, compared to that to the top five or top 10 S&P 500 companies in the market.

Hundreds of billions in aggregate lifetime cash flow. Decades of proven profitability, yet investors briefly assigned SpaceX with a top 10 market value. History tells us that while extreme, this isn't unusual. the dot-com era, many internet companies were valued on what investors hoped they might become. Not what they were. Sometimes these companies actually succeeded, but shareholders who paid unrealistic prices often waited years and sometimes decades just to break even. Again, this isn't really a story about SpaceX. It's a story about IPO investing and investor expectations. Looking at

SpaceX business itself, SpaceX has three major operating engines. The first is Starlink. This This is clearly the crown jewel. It chain rated approximately 61% of company revenue 2025 and remains the company's primary source of profits and cash flow. The second segment, want services, rockets, Falcon 9, and Next Generation Starship. No one questions SpaceX's leadership and rockets in commercial space business.

They literally invented many businesses in this industry. It dominates commercial launches. But many of those launches are supporting Starlink's own satellite network rather than generating incremental third-party revenue yet. The third and final business artificial intelligence. This is the one, the prospectus that is the newest, least profitable, requires the most capex, and is probably five to seven years behind industry leaders. Yes, following the XAI acquisition, SpaceX owns an enormous AI opportunity. The key word here is opportunity. The prospectus calls it PM, short four, total address

market. But this segment also has enormous AI capital requirements. Today, AI consumes cash much faster than it's producing. Starlink is effectively funding much of the company's broader ambitions, while the newer AI and exploration businesses remain lost making. XAI is losing so much money investing in its TAM that SpaceX has already borrowed tens of billions of dollars to fund expansion. This is where investing becomes difficult. Revenue can grow. The story can improve, the technology can be revolutionary. But if billions of dollars must continually be reinvested, with free cash flow remaining under pressure for established players like, say, Google, Microsoft, meta, and Amazon, and massively negative multi-year funding deficit for the likes

of SpaceX, well, eventually investors stop asking, how fast is the company growing? They begin asking, when do shareholders actually receive cash? When do we reach that Jerry McGuire moment? Show me! When does the company show me the money? The third lesson has very little to do with rockets. For those not around during dot-com bubble, it's probably a new lesson to learn. It has everything to do with market structure. It has everything to do with Wall Street, bankers, and value maximization for the company.

Following the IPO, only 4 to 5% of SpaceX shares were available for public trading. Think about that. This means that 95% of the company's shares weren't available to buy or sell. When supply is initially limited, it doesn't take much buying to create enormous price moves. Couple this with the fact that there are special index rules changes made in some large indexes to create billions of dollars in mechanical buying by passive funds and ETFs shortly after the IPO, independent of the company's underlying fundamentals. The last time I heard of this level of restriction in an IPO was way back when, at the end of the dot com, with the little

company back then no one is web van. Yes, investors, the original public home delivery grocery service wasn't Instacart, but it was rather another restricted float IPO almost 30 years ago. It went out of business just a few years later. Okay, investors, so history teaches us a great lesson. Low float doesn't last forever. Employees eventually receive unlocked shares, early venture investors gain liquidity, insiders gradually sell. SpaceX has adopted a staggered lockup schedule extending over the coming year, increasing the effect of public float over time. Yes, they are trying to smooth the process. But we've seen this movie before.

As I said, during the dot-com boom, small public floats often created spectacular early rallies. Pets.com, amongst other shooting stars, but eventually more shares became available. The excitement fades, fundamentals take over again. Again, this isn't really a video of. about SpaceX. It's a story about investor expectations and IPO investing. Every investment deserves two separate questions. Question number one, is this a great business? How much cash is required to generate a cash return? SpaceX may very well become one of the greatest businesses of the next generation. Time will tell. Remember, it took Amazon, nearly 10 years, is a public company for

its stock to catch up to its IPO expectations. The company went public in 1997, had a huge huge run into dot-com top declined 95% as they invested for the future, but the economy went into a recession, and the stock never exceeded its dot-com high until the late 2009, almost exactly 10 years to the month after its dot-com peak. 10 years, not quarters or months, and of course, this has become one of the biggest secular growth stories in the last 40 years. Question number two, am I paying a reasonable price? That's where investing becomes difficult. The best investors learn to admire a company without falling in love with its stock. History has a remarkable way of repeating itself. The names change,

the technology changes, the excitement changes, but investor psychology rarely does. During the dot-com era, people believed the internet would change the world. In fact, it did. Many investors still lost money. Tesla transformed the automobile industry, but early buyers at the wrong valuation still endured years of volatility. Now, SpaceX may transform communications, space exploration, and artificial intelligence. It may ultimately justify much of today's optimism, or it may not. Time will tell, but regardless of the outcome, the investing lesson remains the same. This isn't really a story about SpaceX. It's a story about investor expectations. Because after 35 years in this business, I've learned investors don't lose money simply because they buy bad companies. Most often, they lose

money because they pay the wrong prices for extraordinary stories at the wrong time. I've done it. Charles has done it. Almost everyone who's invested publicly has done it. The best investors stay disciplined. Our team decided to pass on the SpaceX IPO because it didn't exhibit the characteristics or investment methodology looks for at the time of the deal. We chose to separate admiration from valuation on this one at this time. This isn't to say that one day SpaceX won't exhibit the things our team is looking for for our clients, and if the price is right, we might make it a holding here at the firm. But please remember, there can be a big difference between a great business and a great investment.

I'm Chris Paris. Thank you for watching, and we'll see you next week.