SpaceX (SPCX) is set to launch its highly anticipated IPO tomorrow with a share price of $135, aiming to offer 555,555,555 shares and a total valuation of approximately $1.75 trillion—reportedly over 90 times last year’s revenue. Demand for the IPO has surged, exceeding $250 billion, more than three times the public offering size.
However, investors may be cautioned by the critical analysis of Jay Ritter, an IPO expert from the University of Florida. Ritter’s data shows that on average, investors who buy IPOs on their first day underperform the market by 20.5% over three years. Notably, unprofitable firms like SpaceX historically yield worse returns, with a market-adjusted decline of -30.7% in the same period. Additionally, brokerages indicate that the IPO is oversubscribed, potentially leaving average retail investors buying shares well above the offer price.
Goldman Sachs, the lead underwriter for the SpaceX IPO, has led 272 IPOs from 2012 to 2021, which showed an average first-day return of 27.6%. However, these investors experienced a negative 25.6% return when adjusted for market performance over three years.
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