SpaceX IPO Nears: A Century-Defining 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 aerospace giant heading to the public market," but a meticulously engineered wealth transfer. The article first questions SpaceX's core valuation foundation: whether it's heavier Starlink satellites, orbital data centers, NASA's Artemis missions, or the lunar and Martian colonization narrative, almost everything depends on a Starship far more mature than the current version. However, the author believes Starship's technical delivery remains highly uncertain, and the xAI and data center stories also fail to truly support its massive valuation.

The sharper critique lies in the financial structure. The author argues that Nasdaq, S&P 500, and FTSE Russell's adjustments to index inclusion rules 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 passively assume the risk. This is what the article calls the "Rikishi Moment" (index funds, once seen as a blessing for ordinary investors, are publicly humiliated and degraded in an absurd scenario): low-fee index funds, originally John Bogle's gift to the average person, could now become a channel for capital exit and risk transfer due to rewritten rules.

The article concludes by pointing out that even if the IPO succeeds, SpaceX may still face massive funding gaps, continuous dilutive financing, lack of governance rights, and mandatory arbitration. Its impact extends beyond SpaceX itself: this IPO could disrupt liquidity in 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 warn investors: 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 have no right to choose not to participate.

Below is the original text:

With the SpaceX IPO approaching, here are some observations and predictions:

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

Substantively, SpaceX's entire valuation logic rests on the Starship project. And by "Starship," I mean a Starship far more powerful than the version we've seen so far.

· Launching heavier V3 Starlink satellites requires Starship.

· Making these launches—and other launch services for third parties—more economical requires a reusable Starship.

· The promised orbital data center requires Starship.

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

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

But the problem is that Starlink satellites orbit about 300 miles above Earth, while Starship's highest altitude to date—in the recent Version 3 launch, which resulted in the loss of both the booster and upper stage—was only 121 miles. The gap from 121 miles to 300 miles is a long way, requiring a lot of extra fuel. Will Lockett has calculated why the Version 3 Starship is, in his words, "practically useless."

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

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

Of course, you might think that even setting aside the orbital data center, xAI is the true 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 (xAI)'s AI products account for 93% of the market SpaceX claims to address, but 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 its product actually work.

As for the much-hyped $15 billion annual contract with Anthropic, Boyle raises an obvious question: xAI is essentially leasing its computing power and hardware from the Colossus and Colossus II data centers to its competitor, Anthropic. This strongly suggests that xAI cannot currently 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 90 days' notice.)

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

But one thing, unfortunately, I'm quite sure of: before these facts fully emerge, the various private investors who have put money into SpaceX over the past two decades have ample opportunity to dump their shares for huge profits onto an unsuspecting public.

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

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

A. Nasdaq Fired the First Shot in This Shameful Parade

As early as March 10th, when rumors about the SpaceX IPO were still in their early stages, the author of the Substack column 'Keubiko's Musings' published a prescient article titled "The Shame of Nasdaq," with the subtitle: "How to Manipulate an Index to Please a Billionaire."

Nasdaq not only eliminated the so-called "listing maturity" requirement, allowing SpaceX to enter its index just 15 days after the IPO; it also changed the weighting method for "low float" stocks in the Nasdaq 100 index.

SpaceX will be a stock with an extremely low float, with only 5% of shares available for sale, but Nasdaq will calculate its weight as if the float were 15% of total shares. According to Keubiko: the index is attaching a fictitious, multi-hundred-billion-dollar weight to a restricted, tightly held float. Hundreds of billions of dollars of price-insensitive passive capital will be legally and regulatory forced to buy this stock heavily within just a few days. You're essentially forcing a giant fire hose of index capital into the narrow real liquidity of a garden hose. This is a recipe for creating a massive, artificial supply-demand squeeze.

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

Once the 180-day lock-up period for insiders ends and SpaceX's float exceeds 20%, Nasdaq will calculate the stock's weight based on 100% of the total shares outstanding.

Of course, Musk has perfectly timed the end of the lock-up period to coincide with Nasdaq's index rebalancing in mid-December. Keubiko writes again: Index funds will be forced by the rules to buy billions more dollars of this stock at the exact moment insiders can dump their unlocked shares onto the market in large quantities. Don't you already feel your liver being squeezed into pâté?

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

B. Other Major Indices Join the Parade

In this race to the bottom, the S&P 500 has also modified its rules to include index constituents via a "fast track," no longer requiring companies to prove sustained profitability.

Predictably, FTSE Russell was not far behind and quickly followed suit.

C. The "Rikishi Moment"

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

Bak is well aware of the precious gift that John Bogle of Vanguard, the inventor of the low-fee index fund, gave to ordinary investors. But a once incredibly beneficial market tool has now become an evil instrument in the hands of 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 those equally sad eyes. I can only imagine him wearing the same blank, weary acceptance, watching his great invention, once standing so high, fall into the sewer of fraud.

D. Who Benefits from This Theft?

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

But the beneficiaries go far beyond Musk's inner circle. As the excellent Rupert Mitchell (author of Blind Squirrel Macro) said on a recent podcast: virtually every notable person has had the chance to buy SpaceX over the past 20 years—and they did. Trust me, everyone holds 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 own a massive amount of this stock—and they bought it at prices far below what the IPO is offering 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.

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

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

An obvious solution, of course, is to drain Tesla's cash reserves, whether through a merger or further forcing Tesla to invest in SpaceX. But Tesla's cash is far from enough to fill SpaceX's money-burning furnace.

The future will be—and even the S-1 document has foreshadowed this—endless dilutive financing. Buried deep in SpaceX's amended S-1 filing is this warning: We may issue substantial amounts of equity in the future in connection with related transactions.

Even this statement could be considered misleading. Not the part about "heavy equity issuance in the future"; that will almost certainly happen.

The problem is: are these issuances really for "future transactions"? Elon, what you really mean is: to fulfill the transactions that SpaceX has already promised in the S-1 document, right?

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

SpaceX shareholders will be forced into mandatory arbitration. They will have no meaningful voting rights. And governance disputes will be decided by a brand new Texas commercial court, presided over by Musk-friendly judges, with no jury allowed.

4. Final Thoughts

The following thoughts are in no particular order. Also, remember, the only law Elon Musk cannot freely violate is the "Law of Unintended Consequences."

A. This Could All Collapse

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

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

B. It Could Shock Stock and Crypto Markets

Unprecedentedly, SpaceX is offering 30% of its offering shares to retail investors, who must raise cash from somewhere.

Therefore, this IPO could trigger a massive, disruptive sell-off. The most obvious candidates are stocks and crypto assets, as those wanting to participate would need to sell other assets to raise funds. In fact, the downward pressure on Bitcoin's price in recent weeks may partially stem from this kind of selling. (Michael Saylor's recent actions have added fuel to this fire.)

C. It Could Puncture the AI Bubble

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

If SpaceX lists successfully and achieves overwhelming demand, it means investors are willing, despite all the red flags, to voluntarily suspend traditional investment discipline and continue believing the story. But if the result is disappointing, it could mark the beginning of the end for the current investment cycle.

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

D. It Could Permanently Damage the Popularity of Index Funds

For decades, index funds have provided ordinary people—those without sophisticated financial knowledge but needing to invest for retirement—with broad market exposure at very low costs.

But the SpaceX IPO is a huge trap for these ordinary people. If what I foresee happens, they will be forced to buy at significantly inflated prices, only to watch helplessly as their purchased assets inevitably depreciate.

This could leave a sufficiently serious stain on index funds that 401(k) plan sponsors and administrators, and financial advisors more broadly, 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 are right about many things: Tesla's weak fundamentals, lies about full self-driving, the Robotaxi fantasy, shaky accounting. But they were wrong when they thought these issues would affect the stock price.

Someday, somewhere, someone will make a lot of money 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 from it. Tend your garden. Play with your kids. Read a good book. Listen to great classical music. Here's a recording I recently heard and highly recommend.

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