I Valued the SpaceX IPO Like Warren Buffett...
A financial analysis of SpaceX's reported $1.75 trillion IPO valuation, breaking down its three business segments (rockets, Starlink, and AI) using S1 filing data. The presenter argues the valuation is unsupported by fundamentals, and explains three strategic reasons SpaceX is targeting such a high price: market timing, retail investor loyalty, and NASDAQ 100 index inclusion.
Summary
The video analyzes SpaceX's anticipated IPO, which is targeting a $1.75 trillion valuation — a figure that would make it the ninth largest company in the S&P 500, surpassing Berkshire Hathaway and setting a record as the world's largest IPO. The presenter uses SpaceX's S1 filing to assess whether this valuation is justified.
SpaceX operates three distinct business segments. The rocket business accounts for $4.1 billion in revenue but lost $657 million in 2025, largely due to Starship R&D costs. Starlink, the satellite internet service with 10.3 million subscribers and ~9,600 satellites in orbit, generated $11.4 billion in revenue and $4.4 billion in operating income — a nearly 39% operating margin — making it the financial engine of the company. The AI segment, formed through the merger of xAI, generated $3.2 billion in revenue but lost $6.4 billion, reflecting massive infrastructure investment.
To stress-test the $1.75 trillion valuation, the presenter runs a generous discounted cash flow model: assuming $6.8 billion in free cash flow (ignoring capex entirely), 20% annual growth for 10 years, a 10% required return, and a 20x terminal multiple. Even under these highly optimistic assumptions, the model yields an intrinsic value of only ~$438 billion — well below the $1.75 trillion target.
The presenter then explains three reasons SpaceX is still pursuing this valuation. First, market timing: the current market is at its second most euphoric level in history (42x CAPE ratio), making investors willing to pay inflated prices. Second, retail investor exploitation: SpaceX is allocating 30% of the IPO to retail investors (vs. the typical 5–10%), banking on their cult-like loyalty to Musk and lower likelihood of selling post-IPO. Third, the passive investing effect: NASDAQ is changing its rules to allow fast-track inclusion into the NASDAQ 100 after just 15 trading days (down from 3 months), meaning hundreds of ETFs tracking over $600 billion in assets would be forced to buy SpaceX shares automatically, propping up its valuation.
Finally, the presenter addresses Elon Musk's pay package: 1 billion performance-based restricted B-shares vesting in 15 tranches, contingent on market cap milestones up to $7.5 trillion and establishing a permanent Mars colony of 1 million people. Critically, the shares have already been issued and can be voted, giving Musk ~85.1% combined voting power before IPO — effectively giving him unilateral control regardless of public shareholders.
Key Insights
- Starlink is the sole profitable segment, generating $4.4 billion in operating income on $11.4 billion in revenue (~39% operating margin), effectively subsidizing the rocket and AI businesses which lost a combined $7 billion in 2025.
- Even under an unrealistically generous DCF model — ignoring all capex, assuming 20% annual growth, a 10% required return, and a 20x terminal multiple — the presenter calculates SpaceX's intrinsic value at only ~$438 billion, less than a quarter of the $1.75 trillion IPO target.
- SpaceX is deliberately allocating 30% of its IPO to retail investors (versus the typical 5–10%), explicitly betting that Musk's cult-like fanbase is less likely to sell after listing, with SpaceX's own CFO calling retail 'a critical part of this.'
- NASDAQ is changing its rules to allow fast-track inclusion into the NASDAQ 100 after just 15 trading days — down from 3 months — specifically to attract large private companies like SpaceX, meaning over $600 billion in ETF assets would be forced to automatically buy SpaceX shares.
- Elon Musk's 1 billion restricted B-shares have already been issued and can be voted before any performance conditions are met, giving him ~85.1% combined voting power at IPO and rendering public shareholders effectively powerless over company decisions.
Topics
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