As SpaceX gears up for its IPO in June, an expert has voiced concerns about potential trading volatility amid the influence of founder and top boss Elon Musk.
University of Florida finance professor Jay Ritter told Forbes that an "Elon Musk effect" could significantly impact SpaceX's valuation, driving heightened long-term volatility as stocks tied to Musk tend to swing more sharply than the broader market.
Tesla, Inc. (NASDAQ:TSLA) and SpaceX are expected to see divergent and volatile performance, according to Ritter. He noted Tesla faces competitive pressure from Chinese rivals, while SpaceX benefits from investor optimism around its cost-efficient satellite and cargo launch capabilities.
He also warned of “substantial downside potential” if SpaceX goes public at a valuation of $1.5 trillion or more, as Musk would receive shares that bestow more voting power on him than other shareholders.
Ritter warned that even if Starlink generates "tens of billions of dollars per year in profits," those gains could be "squandered” on sending people to Mars rather than directing the money to shareholders.
SpaceX IPO Bubble Fears Grow
The concerns around SpaceX’s IPO come amid a broader discussion about the state of the IPO market. CNBC’s Jim Cramer had previously warned that SpaceX’s public debut could inflate valuations to dangerous levels, potentially creating a bubble.
Moreover, the company’s rapid rise from roughly $350 billion to a reported $1.75 trillion-$2 trillion IPO target has been highlighted as a sign of a growing imbalance in modern markets. Tessera PE CEO Chan Ahn told Benzinga that this 5x appreciation occurred while retail investors were locked out, leading to calls for a more equitable allocation of shares.
Despite these concerns, some investors remain bullish on SpaceX. Baron Capital CEO and founder, Ron Baron, for instance, has expressed his intent to buy $1 billion more SpaceX stock at IPO, adding to his fund’s already substantial holding in the company.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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