SpaceX IPO Approaching: A Century-Level Harvest Hidden in Index Funds

Original Title: The SpaceX IPO Will Be the Theft of the Century

Original Author: Lawrence Fossi

Original Translation: Peggy, BlockBeats

Editor's Note: In the author's view, the SpaceX IPO is not an inspirational story of "a commercial space giant heading to the public market," but a meticulously engineered transfer of wealth. The article first questions SpaceX's core valuation basis: whether it's heavier Starlink satellites, orbital data centers, NASA's Artemis missions, or the narrative of lunar and Martian colonization, almost everything relies on a Starship far more mature than the current version. However, in the author's opinion, the technological delivery of Starship remains highly uncertain, and the xAI and data center narratives also fail to truly support its massive valuation.

The sharper part lies in the financial structure. The author argues that index inclusion rule changes by Nasdaq, the S&P 500, and FTSE Russell could allow SpaceX to rapidly enter major indices with a low float, forcing massive passive index funds to buy in at inflated valuations. This provides an exit window for early private investors, insiders, and long-term capital providers, while ordinary 401(k) and IRA retirement account investors are passively left holding the risk. This is the so-called "Rikishi moment" (index funds, once hailed as a boon for ordinary investors, are publicly humiliated and degraded in an absurd scenario): low-fee index funds, originally John Bogle's gift to the common market participant, could now, through rule rewrites, become conduits for capital exits and risk transfer.

The article concludes by pointing out that even if the IPO succeeds, SpaceX may still face a massive funding gap, continuous dilutive financing, lack of governance rights, and mandatory arbitration. Its impact extends beyond SpaceX itself: this IPO could shake liquidity in both stock and crypto markets, act as a stress test for the AI bubble, and potentially damage the long-established trust in index funds. The author's conclusion is not to short SpaceX, but to remind investors that when Musk-style narratives, passive index capital, and market frenzy intertwine, the most dangerous thing is often not that the story isn't big enough, but that ordinary people don't have the right to choose not to participate.

The following is the original text:

As the SpaceX IPO approaches, here are some observations and predictions:

1. From a Business Perspective, SpaceX Will Face a Dismal Failure

Substantively, the entire valuation logic for SpaceX is built on the Starship project. What I mean by "Starship" is one far more advanced than the version we've seen so far.

· Launching the heavier V3 Starlink satellites requires Starship.

· Making these launch missions—and other launch services for third parties—more economically viable requires a reusable Starship.

· The promised orbital data centers require Starship.

· Fulfilling SpaceX's obligations to NASA's Artemis program requires Starship.

· Any lunar or Martian colony also requires Starship. SpaceX's IPO filing even prophesies "new trillion-dollar markets on the Moon, Mars, and beyond."

But the problem is that Starlink satellites orbit at about 300 miles above Earth, while Starship's highest altitude to date—achieved during the recent Version 3 launch, which resulted in the loss of both the booster and upper stage—was only 121 miles. From 121 to 300 miles is a significant gap requiring a vast amount of additional fuel. Will Lockett has calculated why the Version 3 Starship is, in his words, essentially "practically useless."

And this doesn't even touch on the near-physical impossibility of orbital data centers, or the extremely low probability of Starship completing its cryogenic propellant transfer mission for Artemis III.

(I've used this analogy before, but I like it too much not to use it again.)

Of course, you might think that even stripping away the orbital data center, xAI is the real key to SpaceX's ultimate success. If so, I suggest you look into the facts discussed by Patrick Boyle in this YouTube video (starting at 10:25). As Boyle points out: this company's (xAI's) AI products account for 93% of the addressable market SpaceX claims; yet its flagship product, Grok, isn't even used by its own engineers. And it's trying to spend $60 billion to acquire competitor Cursor just to make their own product work.

Regarding the heavily publicized, $15 billion annual contract with Anthropic, Boyle raises an obvious question: xAI is essentially renting out the computing power and hardware from its Colossus and Colossus II data centers to its competitor, Anthropic. This strongly suggests that xAI cannot yet fully utilize its own data center capacity. (Boyle also raises a less obvious point: Anthropic can cancel this three-year agreement at any time with just 90 days' notice.)

However, it will take some time for all these hard facts to fully surface. How long? Two years? One year? Maybe less?

But one thing, unfortunately, I am quite certain of: these facts will not fully come to light before the various private investors who have funded SpaceX over the past two decades have had ample opportunity to dump their shares for massive profits onto an unsuspecting public.

2. As a Wealth Transfer Machine, SpaceX Will Be Stunningly Successful

A series of rule changes by Nasdaq, the S&P 500, and FTSE Russell almost guarantee that the SpaceX IPO will enormously enrich SpaceX insiders while plundering ordinary retirement investors who have unwittingly put their 401(k) and IRA savings into broad-based index funds.

A. Nasdaq Fired the First Shot in This Disgraceful Parade

As early as March 10, when rumors about the SpaceX IPO were still in their early stages, the author of the Substack column 'Keubiko's Musings' published a prescient piece titled "Shame on Nasdaq," with the subtitle: "How to manipulate an index to curry favor with a billionaire."

Nasdaq not only scrapped the so-called "listing maturity" requirement, allowing SpaceX to enter its index just 15 days post-IPO; it also changed the way it weights low-float stocks in the Nasdaq 100 Index.

SpaceX will be a very low-float stock, with only about 5% of shares available for sale, yet Nasdaq will calculate its weight as if the float were 15% of total shares outstanding. According to Keubiko: The index is imposing a fictitious, tens-of-billions-of-dollars weight on a limited, tightly controlled float. Hundreds of billions of price-insensitive passive capital will be legally and rule-bound to aggressively buy this stock within just a few days. You are essentially forcing a giant firehose of index capital into the narrow garden hose of real liquidity. This is the recipe for a massive, artificial supply-demand squeeze.

Oh, but it gets worse. Much worse. As Keubiko writes, the math gets "truly brutal" here.

Once the 180-day insider lockup expires, and SpaceX's float exceeds 20%, Nasdaq will calculate the stock's weight based on 100% of total shares outstanding.

Of course, Musk has perfectly timed the lockup expiry to coincide with Nasdaq's index rebalancing in mid-December. Keubiko again: Index funds will be rule-bound to buy tens of billions more dollars of this stock at the exact moment insiders can dump their unlocked shares en masse into the market. Can you feel your liver being turned into foie gras yet?

Since Keubiko first blew the whistle in that piece, many financial journalists and market experts have realized what's happening. You can now find numerous articles describing how Nasdaq's rule rewrite ensures that millions of passive investors—ordinary people with retirement savings in broad-based index funds—are forced to buy SpaceX stock at absurd valuations.

B. Other Major Indices Join the Parade

In a race to the bottom, the S&P 500 has now also amended its rules to allow fast-track index inclusion and no longer requires companies to prove sustained profitability.

Predictably, FTSE Russell soon followed suit.

C. "The Rikishi Moment"

Phil Bak recently gained significant attention for his excellent Substack article, "The Rikishi Moment." The title references a profound humiliation suffered by the late, great baseball player Pete Rose—great, yet deeply flawed.

Bak understands what a precious gift John Bogle of Vanguard, the inventor of the low-fee index fund, gave to ordinary investors. But what was once an immensely beneficial market tool has now been twisted into an evil instrument by cynics and the unscrupulous. Bak writes: John Bogle is no longer with us. I can only imagine how he would view what is happening to index funds today. I can only imagine his eyes, equally sorrowful. I can only imagine his equally blank, weary acceptance, watching his great invention, which once stood so tall, descend into the sewer of fraud.

D. Who Will Benefit from This Theft?

This question seems too easy, doesn't it? Elon Musk, and his long-time enablers like Antonio Gracias, Steve Jurvetson, and Ira Ehrenpreis.

But the beneficiaries extend far beyond Musk's inner circle. As the excellent Rupert Mitchell (author of Blind Squirrel Macro) said on a recent podcast: Over the past 20 years, practically every big-name institution has had the chance to buy SpaceX—and did buy SpaceX. Trust me, everyone owns it. There isn't a sovereign wealth fund, an institution, a mutual fund, a private equity firm, or a crossover hedge fund that doesn't have a massive position in this stock—and they all bought it at prices far lower than the IPO offer price to the public.

Unsurprisingly, guess who else we can add to Rupert's list:

3. What Happens After the Thieves Flee the Scene?

This question is easy to answer: disappointing business performance (see Part 1), and endless equity dilution.

The SpaceX IPO, even including the "greenshoe option," can raise at most about $85 billion. But reading carefully through its filing documents—as Greg Collins of Cape Fear Advisors has done—reveals that SpaceX's capital requirements will reach approximately $235 billion by 2030.

If we assume SpaceX raises $85 billion from the IPO and uses $20 billion to repay debt, that still leaves a funding gap of $170 billion. (Collins expects a smaller raise and a larger gap, but either way, it's a massive shortfall.)

Of course, an obvious solution is to drain Tesla's cash reserves: either through a merger or by further compelling Tesla to invest in SpaceX. But Tesla's cash is nowhere near enough to fill SpaceX's burning furnace.

The future will involve—as even the S-1 document has pre-announced—endless dilutive financing. Buried deep in SpaceX's amended S-1 filing is this warning: We may issue a substantial amount of equity in the future in connection with related transactions.

Even this statement itself can be seen as misleading. Not the "will issue a lot of equity in the future" part; that's almost certain to happen.

The problem is, are these issuances really for "future transactions"? Elon, isn't what you really mean to say: to fulfill the transactions that SpaceX has already committed to in the S-1?

As for any potentially misleading statements or false information in the registration document, or any current or future misconduct by Musk and other officers and directors, harmed investors will be virtually powerless.

SpaceX shareholders will be forced into mandatory arbitration. They will have no meaningful voting rights. And governance disputes will be adjudicated by a new Texas commercial court, presided over by Musk-friendly judges—without the possibility of a jury.

4. Final Thoughts

The following thoughts are in no particular order. Also, remember that the only law Elon Musk seems unable to flout with impunity is the "law of unintended consequences."

A. It Could All Collapse

The SpaceX IPO could be a catastrophic failure from the start, or even be delayed or canceled. The reason is simple: there may be too many shares chasing too few buyers, and not enough capital in the market to absorb the supply.

Rupert Mitchell and Ben Brey discussed these possibilities in a highly informative written report and subsequent podcast.

B. It Could Impact Stock and Crypto Markets

SpaceX is offering an unprecedented 30% of its IPO shares to retail investors, who will need to raise cash from somewhere.

Therefore, this IPO could trigger a massive and disruptive sell-off. The most obvious candidates are stocks and crypto assets, as those wanting to participate in the IPO will need to sell other holdings to raise funds. In fact, the downward pressure on Bitcoin price in recent weeks may partly be due to this type of selling (a situation further fueled by Michael Saylor's recent actions).

C. It Could Prick the AI Bubble

Chris Irons of Quoth The Raven believes the SpaceX IPO will act as a market referendum on whether the AI investment bubble can continue to inflate.

If SpaceX goes public successfully with overwhelming demand, it indicates that investors are willing to voluntarily suspend their usual investment discipline and continue believing the story, despite all the red flags. However, if the outcome is disappointing, it could mark the beginning of the end for this investment cycle.

(In a recent podcast with Adam Taggart, Chris described the current financial markets as "a digital casino on cocaine.")

D. It Could Permanently Damage the Popularity of Index Funds

For decades, index funds have provided ordinary people—without sophisticated financial knowledge yet needing to invest for retirement—access to broad market exposure at very low cost.

But the SpaceX IPO is a massive trap for these ordinary people. If the scenario I foresee unfolds, they will be forced to buy in at severely inflated prices, only to watch their purchased assets inevitably depreciate.

This could leave a stain on index funds severe enough that 401(k) plan sponsors and administrators, as well as financial advisors more broadly, may no longer recommend them as suitable investment vehicles.

E. Don't Try to Short SpaceX!!

Elon Musk is a figure with cult-like appeal. More importantly, he has repeatedly proven himself almost immune to any truly effective market, legal, or regulatory scrutiny.

Musk's critics have been right about many things: Tesla's poor fundamentals, the lies about Full Self-Driving, the Robotaxi fantasy, the shaky accounting. But they were wrong when they thought these issues would affect the stock price.

Someday, somewhere, someone will make a fortune shorting Tesla or SpaceX. But that person probably won't be you.

At least for now, the best way to understand Tesla is not as a financial investment, but as a religion. Today, SpaceX can be added to that category.

So my advice is: Stay away. Tend your garden. Play with your kids. Read a good book. Listen to some great classical music. Here's a recording I heard recently and highly recommend.

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