Small investors have powered SpaceX higher, but they’ll shoulder much of the risk when reality bites
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In the second trading day as a public company, SpaceX’s initial public offering still was being treated as an extraordinary event in Wall Street history:
The largest IPO ever, creating the first trillionaire in Elon Musk, its boss, and bringing the company’s market value to $2.28 trillion.
On Monday, the stock gained 19.6% on top of its first-day gain of 19%, closing at $192.50. But the IPO is extraordinary in other ways that are becoming more clear as the pre-IPO frenzy yields to the company’s post-IPO reality.
The SpaceX IPO raises unprecedented questions about Wall Street’s role in future mega-IPOs, what this event means for the current bull market in stocks, the wisdom of concentrating so much wealth in so few hands and the rise of wealth inequality. The answers to these questions may not be pretty.
The fact that Wall Street designed a deal that needed $20 billion of retail money to get it across the line tells you something about who they wanted in the building.
— Financial commentator Patrick Boyle
Last week, I pointed to some issues connected to the SpaceX IPO, including the utterly fantastical rationale for the company’s outsized market valuation and the prospect that billions of dollars of shares may be shoved into the retirement accounts of investors who don’t want them, thanks to the willingness of Nasdaq and other stock index sponsors to accept the shares into their indices well ahead of the customary “seasoning” delay.
But there’s more to think about. Start with the paucity of control that shareholders will get for their investments.
Law professor Ann Lipton, who monitors shareholder rights from the University of Colorado, reminds us of the traditional observation that “shareholders have three powers with respect to the corporations in which they invest: to vote, to sell, and to sue,” enabling them to “protect their investment and discipline management.”
Investors in SpaceX have none of those options.
The single votes that they acquire for every SpaceX Class A share offered in the IPO is swamped by the 10 votes per share of the company’s class B stock. As I reported last week, Musk will own a mere 12.3% of the Class A shares, but 93.6% of the Class B shares, which have 10 votes each. That gives him 85.1% of all shareholder votes.
As a result, the prospectus says, “Mr. Musk will be able to control the outcome of matters requiring shareholder approval,” including the selection of directors and even whether he himself should step down.
How bad are sales of Tesla’s Cybertrucks? Nearly 20% of the vehicles went to Elon Musk’s other companies, raising questions about the vehicle’s future.
Wall Street firms have enticed retail investors into buying into the IPO — Fidelity, for example, reduced the minimum account balance allowing clients to buy into an IPO from $100,000-$500,000 to $2,000.
But although those buyers can sell at any time, they will be punished for selling within the first 15 days after the IPO: The “first flip,” Fidelity warns, will result in their being blocked from future IPOs for six months; a second flip blocks them for a year and a third blocks them permanently.
On the other hand, insiders can sell a lot sooner than is customary. Typically, insiders of newly public companies have to wait at least six months before selling their shares, a period known as the lockup.
SpaceX insiders, however, can start selling their shares as soon as the second trading day after the company issues its second-quarter financial disclosure, expected around Aug. 11. (Musk and some other highly placed insiders have committed to holding their shares for at least 366 days.)
SpaceX reserved an unusually large tranche of its IPO for retail investors — 20% or more of the $75 billion raised. “The fact that Wall Street designed a deal that needed $20 billion of retail money to get it across the line tells you something about who they wanted in the building,” notes the former hedge fund operator and YouTube financial commentator Patrick Boyle.
Why did the company and its underwriters do that? It’s because, compared with institutions, retail investors are credulous, vulnerable to hype, and given to hanging on to a stock long after institutions have done the math on an underperforming investment and exited.
Shareholder lawsuits? Nope. The SpaceX bylaws require that any shareholder actions be brought not in court, but in arbitration — traditionally a management-favoring venue.
So no vote, no sales, no lawsuits. That might not matter as much if shareholders could count on the SpaceX board to protect their interests, but your old Magic 8 Ball, if it’s on the ball, might counsel: “Don’t count on it.”
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Of the six board members listed in the IPO prospectus (not counting Musk and Gwynne Shotwell, who basically runs SpaceX as its chief operating officer), four are old cronies of Musk’s. They’re Ira Ehrenpreis, a longtime director of Tesla, which Musk controls; Antonio Gracias, a director of Musk’s private firms Neuralink and the Boring Co. and a former Tesla director; Steve Jurvetson, another former Tesla director; and Luke Nosek, a co-founder of PayPal, which was the original source of Musk’s wealth.
The boards of Musk’s companies have generally indulged his desires. Gracias and Jurvetson were on the board of SolarCity, which Musk merged into Tesla when the former was looking financially impaired in 2016. Ehrenpreis was on the Tesla board when it gifted Musk with a $1-trillion pay package last year.
That brings us to the question of whether it’s healthy for society to have so much wealth concentrated in the hands of mega-plutocrats such as Jeff Bezos, Mark Zuckerberg and Musk. These are people who are not at all shy about wielding their wealth to get their way, devil take the hindmost. Herman Melville put his finger on the issue in Moby-Dick, through Father Mapple’s sermon, in which he thunders, “Sin that pays its way can travel freely, and without a passport; whereas Virtue, if a pauper, is stopped at all frontiers.”
Melville wrote that in 1851, but it echoes in Musk’s DOGE service, where his henchpersons ran roughshod through federal programs, stripping them of personnel and funds in what turned out to be a vastly overstated claim of budgetary savings. The wreckage included the U.S. Agency for International Development, or USAID, which could have played an important role in addressing the ongoing Ebola virus outbreak, the cause of illness and death for hundreds of victims in Africa.
But DOGE helped the Trump administration reduce USAID to an empty shell. “About two weeks into the Trump administration, Musk tweeted that he just spent the weekend feeding USAID into the wood chipper,” recalls former USAID health official Nicholas Enrich, who was present at the destruction.
The siren song of Musk’s wealth and the prospect that investors would buy in despite the fantastical claims being made for SpaceX’s future allowed Musk to bully the biggest Wall Street investment banks into capitulating to his vision, and to his personal IPO design. (The IPO prospectus lists 32 banks as underwriters.)
Following fellow right-winger RFK Jr., Elon Musk blames the Jews, in the form of the Anti-Defamation League, for his self-inflicted disaster at X (formerly Twitter).
In a normal IPO, the banks’ role is to test the waters for an upcoming issue, determining the right opening price. In this case, Musk decreed an opening price of $135 per share and the banks went along. They also accepted what may be record-low fees for what turned out to be their order-taking role.
Traditional IPO fees run as high at 7% of the issue, though fees have been trending toward 1% on mega-deals. For SpaceX, the fee was 0.7%; that number is small but it still came to about $500 million, to be doled out by Goldman Sachs and Morgan Stanley, the lead banks.
This may be the right moment to consider that even the most high-flying investment crazes generally end in tears. AI is beginning to have that acrid smell. It’s proper to note that the driver of SpaceX’s valuation isn’t its space launches or its Starlink orbital wifi satellites, but its commitment to AI.
(Part of what may be driving the SpaceX frenzy my be the gains collected by early investors in Tesla, which have lent Musk a visionary’s halo. That said, however, Tesla wasn’t added to the Standard & Poor’s 500 index and therefore into large-cap index funds until 10 years after its 2010 IPO.)
That’s what accounts for almost all of the $28.5 trillion “total addressable market” the company claims for its services, never mind that it’s a distant also-ran in the AI business. Never mind that for SpaceX, AI does little but burn money, accounting for $12.7 billion of its $20.7 billion in capital expenditures last year while losing $6.36 billion on $3.2 billion in revenue.
Does the SpaceX IPO signal a bull-market top? That question was raised Sunday by Michelle Celarier, one of the nation’s most percipient financial market reporters. “The laws of economics say there has to be a break someday,” she wrote. “How brutal it will be and how effective governments and central banks will be in controlling the fallout is the unknown.”
Celarier quotes Erica Payne, the founder and president of Patriotic Millionaires, observing that “86 percent of Americans are worried about the price of food. Elon Musk is a trillionaire. These two things are deeply, inherently connected.”
The SpaceX IPO may eventually stand in retrospect as a monument to this moment.
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Ideas expressed in the piece
The article argues that the SpaceX IPO was structured first and foremost to entrench Elon Musk’s control, pointing to an extreme dual‑class share structure in which Class B stock carries 10 votes per share and Musk retains overwhelming voting power, leaving public investors with virtually no meaningful say over corporate decisions[4].
It contends that Wall Street and participating brokers deliberately leaned on small investors to get the deal done, citing how platforms such as Fidelity lowered the account minimum for IPO access to $2,000 and imposed significant penalties on customers who sell within the first 15 days, effectively encouraging retail buyers to hold even if the stock quickly becomes overvalued[1].
The column maintains that traditional shareholder protections have been hollowed out: mandatory arbitration clauses and other bylaw provisions mean investors cannot realistically bring class‑action lawsuits in court, sharply limiting the classic “vote, sell, sue” toolkit that is supposed to let shareholders discipline management[4].
It portrays SpaceX’s market value as based on “fantastical” assumptions, asserting that the company is still losing large sums of money—especially on AI projects—and that the lofty price is driven more by hype about a massive “total addressable market” than by demonstrated, profitable businesses, setting up small investors to absorb heavy losses if expectations reset.
The piece stresses that SpaceX’s board is dominated by long‑time Musk confidants, many of whom have served on boards of Musk’s other companies, and it argues that this pattern of loyalists has historically produced boards that ratify outsized pay packages and controversial related‑party transactions rather than pushing back in the interest of minority shareholders.
It links the IPO to broader worries about wealth concentration, framing Musk’s emergence as a prospective trillionaire as another example of a system that funnels extraordinary gains to a handful of tech plutocrats while most Americans struggle with basic costs such as food, and it presents the deal as emblematic of deepening U.S. wealth inequality.
By invoking Musk’s influence over federal programs in the past, the article suggests that this concentration of economic power has already had tangible consequences for public agencies and global health efforts, and it warns that handing even more financial and political leverage to a single business figure should be viewed as a societal, not just a market, concern.
Finally, the column raises the possibility that such an exuberant, retail‑heavy mega‑IPO could mark a late‑cycle moment in the current bull market, echoing other financial writers who note that major IPOs often arrive when optimism is highest and valuations are stretched, with previous waves of enthusiasm—from tech to AI—frequently ending in sharp corrections that catch small investors on the wrong side[2].
Different views on the topic
In contrast, some investment firms present the IPO as a milestone in opening access to a historically important private company, emphasizing that this is the first time SpaceX shares can be bought on public markets and that ordinary investors, not just venture funds and institutions, can now participate in any future growth[1].
Supporters of the retail allocation argue that lowering account minimums and reserving a sizable portion of shares for small investors helps democratize opportunities that were once the preserve of the wealthy, framing broad participation in a marquee IPO as a partial counterweight to the very inequality critics highlight[1].
From this vantage point, broker “flipping” penalties are described as standard practice aimed at discouraging short‑term speculation and ensuring more stable ownership, not as a punitive tool; firms such as Fidelity explicitly tell clients they are free to sell whenever they choose, while warning that rapid turnover may limit access to future offerings in order to favor longer‑term investors[1].
Defenders of dual‑class structures note that allowing founders to retain outsized voting power can shield long‑term, high‑risk projects—such as reusable rockets, global satellite networks, and AI infrastructure—from the pressure of quarterly earnings cycles, and they point out that similar arrangements exist at many prominent U.S. technology companies without preventing substantial shareholder gains.
Some valuation and market analyses suggest that, while the IPO pricing is rich, SpaceX’s combination of dominant launch services, the rapidly scaling Starlink broadband business, and potential new lines tied to AI and space‑based platforms could plausibly support a very large long‑term equity value; rather than dismissing the IPO outright, these assessments attempt to quantify upside and downside scenarios using the company’s own prospectus data[3][5].
Market strategists and wealth managers frequently caution that IPOs as a group have tended to lag the broader market after their initial pop, but they also emphasize that this pattern does not rule out strong long‑term returns from individual names, and they urge investors to focus on fundamentals, diversification, and position size rather than interpreting any single offering as proof of an imminent market peak[2].
Some commentary from regional banks and advisors portrays the SpaceX deal as one high‑profile opportunity within a broader landscape of record stock indexes, arguing that a disciplined investor can treat it as an optional, high‑risk growth position—or ignore it entirely—without endangering retirement savings, thus challenging the idea that this one IPO poses systemic danger to small investors or pension funds[2].
Critics of the article’s inequality framing contend that large fortunes accumulated via equity stakes in innovative companies are a built‑in feature of modern capitalism, reflecting the outsized risks and long time horizons involved; in this view, society also gains from cheaper access to space launches, global satellite internet, and downstream technologies, even if the financial rewards to founders and early backers remain highly unequal.
