SpaceX set to vault past Amazon in market value as shares extend IPO surge

SHARES of Elon Musk’s SpaceX extended a post-IPO rally and rose more than 8 per cent in premarket trading on Tuesday, putting the company on course to overtake Amazon.com in market value to become the world’s fifth-largest company.

The stock was last up 8.5 per cent at US$208.90, jumping more than 54 per cent above its US$135 IPO price and giving the company a market capitalisation of around US$2.75 trillion if gains hold.

Amazon’s valuation stands at US$2.66 trillion, Microsoft’s at US$2.95 trillion, and the world’s top three companies exceed US$4 trillion in market value.

“We can say with certainty that this valuation makes absolutely no sense today. People are buying SpaceX in the expectation that others will buy too and push the price higher - that’s speculation,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.

The company reported sales of US$18.67 billion last year and a net loss of US$4.94 billion after merging with money-losing xAI - in contrast to many of Wall Street’s big technology companies that have posted bumper numbers.

SpaceX’s options activity is set to begin as soon as Tuesday, with early activity expected to be heavy, volatile and likely expensive.

Analysts and portfolio managers said investors should brace for volatility, particularly early on in SpaceX’s life as a public company, due to its relatively small float and high valuation.

The rally could continue as SpaceX is set for fast-track inclusion in the Nasdaq 100, which will soon make it a major holding for passive funds and ETFs that track the index, creating a fresh source of demand for its shares.

FTSE Russell and MSCI are also set to add the stock to their indexes, effective on June 26 and June 29, respectively.

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“While index inclusion alone is typically insufficient to drive sustained repricing, we see the combination of passive flows, momentum, and limited float driving upside beyond historical index-addition moves,” brokerage Zephirin Group said in a note.

SpaceX also said on Monday that its underwriters had exercised the “greenshoe” option to purchase additional shares, increasing the total proceeds from its initial public offering to US$85.7 billion from US$75 billion that it raised last week.

More than US$3 billion worth of SpaceX shares exchanged hands as of 7.21 am ET, which was several times the trading volumes in Nvidia, Microsoft, Tesla and Apple combined.

Other heavyweight technology stocks, including Nvidia and Alphabet, were trading slightly lower.

SpaceX shares cut some gains in premarket trading on Tuesday after the company said it would acquire software company Anysphere for US$60 billion. REUTERS