Why One Of Wall Street's Most Respected Valuation Experts Is Passing On Elon Musk's SpaceX
NYU Stern Professor Aswath Damodaran, who is also known as the “Dean of Valuation,” says that he will avoid participating in the upcoming SpaceX IPO, citing several issues with the commercial space flight giant.
Narrative-Driven Value
In a thread on the social media platform X on Thursday, Damodaran shared a detailed view on the upcoming SpaceX IPO. “The value of SpaceX is driven by narrative,” the professor said in one of the posts on the thread.
Damodaran outlined concerns with the $28.5 trillion total addressable market (TAM), of which $26 trillion hinges on artificial intelligence. “The total addressable market (TAM) in the prospectus for the three businesses push into fantasy land for AI ($26 trillion) and the limits of plausible for space and connectivity,” he said.
In the blog post, he shared that he disagreed with the TAM estimates, instead touting a TAM for the company’s exploits at “about $3 trillion to $4 trillion.” Damodaran also said that SpaceX’s satellite internet service Starlink “carried the company in 2025.”
However, he acknowledged that the Anthropic lease deal for the Colossus datacenter “should kickstart revenues next year,” but warned against future tensions should xAI decide to face off against Anthropic in the market.
Damodaran To Avoid SpaceX’s IPO
“As an investor, I like the company for its audacity and imagination, but worry that it will overreach in AI,” Damodaran said. He also expressed concerns that the company’s governance structure had “no guard rails.” The professor also shared that the company’s $1.8 trillion valuation was “overpriced.”
In the blog, Damodaran shared that SpaceX was “too richly priced” given his estimated “valuation of $1.25-$1.35 trillion for the equity in the company.” He also shared that SpaceX’s going public opened it to “market scrutiny,” as well as short positions.
“If you are a trader, you are playing a very different game,” he warned, adding that making money off the SpaceX IPO depended on “how good you are gauging mood and momentum, and shifts in both.” Damodaran added that he was “awful at both,” and that he would stay in his lane.
SpaceX IPO
The comments come as the S&P 500 index, operated by the S&P Dow Jones Indices, said that it won’t be amending its rules that could have allowed SpaceX a faster entry into the index.
The index announced that it would not be cutting short the 12-month seasoning period for newly public companies. S&P 500 also won’t be waiving existing profitability and public float requirements. Meanwhile, Space-themed ETFs recorded more than $5 billion in assets as the market readies itself for SpaceX's IPO.
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