With SpaceX targeting a $2 trillion valuation at its IPO this summer and raising $75 billion in the process, it will be by far the largest public debut in market history.
So it’s worth considering what happened when companies set IPO records in the past. Did the previous five largest IPOs reward Day 1 shareholders?
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How the 5 biggest IPOs in history have performed
Let’s look at the largest IPOs in recent history (when adjusted for inflation). The table below shows the returns for those five names: Saudi Aramco, NTT DoCoMo, Alibaba, Enel, and Visa (NYSE: V).
|
Company |
Year |
Capital Raised |
3-Month |
1-Year |
5-Year |
IPO to |
|---|---|---|---|---|---|---|
|
Saudi Aramco |
2019 |
$38 billion |
(21%) |
(5%) |
(21%) |
(9%) |
|
NTT DoCoMo |
1998 |
$37 billion |
19% |
(11%) |
(51%) |
150%* |
|
Enel |
1999 |
$37 billion |
(5%) |
3% |
5% |
57% |
|
Alibaba |
2014 |
$35 billion |
20% |
(37%) |
88% |
48% |
|
Visa |
2008 |
$28 billion |
14% |
(18%) |
146% |
1,912% |
Data source: author’s research. Note: NTT DoCoMo was taken private in 2020.
A pretty clear pattern emerges. While many find success right out of the gate, nearly all go on to underperform.
The only company to crush the market was Visa; Saudi Aramco is actually down since its debut, and the remaining three — Enel, NTT DoCoMo — failed to keep pace with the market by a wide margin.
And that’s despite being great companies. None of these companies is a bad business; rather, the expectations set at their IPOs were unrealistic.
What this means for SpaceX’s IPO
The pattern in the table isn’t that big IPOs are scams, but that maximum hype tends to coincide with maximum valuation, and maximum valuation isn’t the best place to compound from, leaving little room for error or unforeseen circumstances.
A $2 trillion IPO price tag would mean SpaceX launches at roughly Aramco’s current valuation while generating less than 15% of Aramco’s revenue. That’s a whole lot of future growth already baked in.
If SpaceX prices anywhere near $2 trillion, history says waiting through the post-IPO drawdown is the better move for investors intent on owning SpaceX shares. Of course, patterns aren’t prescriptions, and it’s completely possible that SpaceX behaves as an outlier, like Visa. It’s just important to be clear-eyed about just how massive the company’s valuation will be at the IPO and what that might mean for the stock.
