THE GIST

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SpaceX set its IPO price on Wednesday at $135 per share, targeting a valuation of at least $1.75 trillion. Cool number, right?

WHAT HAPPENED

But let’s be clear about what this means, because rather than running a traditional book-building process where institutional investors bid for shares and the market collectively discovers what the company is worth, Elon Musk is telling investors the price and inviting them to participate or not. For context, even Google let the market decide in 2004. Elon has rather predictably decided the market’s opinion really shouldn’t matter when it comes to his big baby space company.

The prospectus justifies the number by identifying what SpaceX calls the “largest actionable total addressable market in human history,” pegged at $28.5 trillion. For more context, the U.S. GDP is roughly $32.4 trillion. The same document also mentions, in passing, that the company “has a history of net losses and may not achieve profitability in the future.” Those sentences exist together in the same public filing without apparent irony.

And by the way, Morningstar published a note Monday that may offer a clue about why Musk chose to set his own price rather than let the street discover it. The firm values SpaceX at $780 billion, and arrived there by valuing the rocket and Starlink business at $611 billion then adding a probability-weighted $170 billion for xAI. The gap between $780 billion and $1.75 trillion is essentially a $970 billion argument about whether Musk’s vision is worth paying for before it’s proven.

WHY IT MATTERS

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If institutional investors share Morningstar’s skepticism, a traditional book-building process might have produced a number Musk didn’t like. Drawing a line in the sand at $135 avoids that conversation entirely.

The xAI piece is where Morningstar gets most pointed. The firm assigned a 43% probability to its downside scenario for the AI segment, said Grok is not “one of the leading AI labs today,” and described the $250 billion xAI acquisition as carrying genuine value destruction risk. The plan to build orbital data centers is unproven, capital-intensive, and not yet something a financial model can defend with a straight face. Musk’s dual-class share structure means IPO buyers get the stock but not meaningful influence over what happens to it. Morningstar’s proxy team was not charmed.

None of this means the stock won’t surge on debut. A low float, 17 investment banks in the syndicate, and an unprecedented rule putting SpaceX on track for Nasdaq 100 inclusion just 15 trading days after IPO will force passive funds to buy regardless of what Morningstar thinks. Index inclusion is not a valuation argument. It is a mechanical buying event, and it will produce a first-day price that makes everyone who got allocation look smart for about 15 trading days.

WHAT’S NEXT

Morningstar’s advice is to wait for a better entry point after the forced buying clears. The rocket business is real. Starlink is real. The $970 billion premium above fair value is the part that requires either an exceptionally long time horizon or genuine comfort with Elon being… well, whatever you need him to be.