Author: Claude, Deep Tide TechFlow

Deep Tide Introduction: The SpaceX roadshow will kick off this week, but Morningstar has poured cold water on it. This research institution gives a fair value of $780 billion based on a DCF model, which is only 45% of SpaceX's target valuation of $1.75 trillion, with analysts straightforwardly declaring that "the company is severely overvalued." Morningstar values the core launch and Starlink business at $611 billion, while the AI-related business from xAI is given a probability-weighted valuation of only $170 billion. However, Morningstar also acknowledges that due to the extremely low float and Nasdaq 100's fast inclusion mechanism, SpaceX's stock price may still rise in the short term.

SpaceX is about to face what could be the largest IPO in history, while one of Wall Street's most well-known independent research institutions has just thrown cold water on it.

According to a Reuters report on June 2, Morningstar released its first research coverage on SpaceX the night before the company's planned roadshow, giving a fair value estimate of $780 billion, nearly halving the last valuation of $1.53 trillion on the secondary market platform Forge Global, and it is only about 45% of its IPO target valuation of $1.75 trillion.

Morningstar stock analyst Nicolas Owens is very clear: "We believe the company is severely overvalued, and investors will have the opportunity to buy in at a more attractive price after the IPO."

How $780 billion comes from: Launch + Starlink value $611 billion, AI only $170 billion

Morningstar's valuation breakdown reveals the core of the disagreement.

Owens' DCF model estimates SpaceX's core launch business and Starlink satellite broadband business at approximately $611 billion in enterprise value, while assigning a probability-weighted valuation of about $170 billion to the AI business (including xAI and the social media platform X). Morningstar gives SpaceX a "narrow moat" rating, citing the cost advantages of its reusable rockets and the scale effects of the Starlink constellation, but believes that the recently acquired AI business has dragged down the overall rating.

Specifically regarding the AI business, Morningstar modeled three scenarios: the most optimistic "Moon Landing" scenario values it at $1.3 trillion, but assigns only a 7% probability; the most pessimistic "Unfeasible" scenario would destroy over $81 billion in value, with a probability of 43%. Owens wrote, "We do not believe Grok is one of the leading AI labs today." He also warned that the future prospects of SpaceX's AI business depend on unproven technologies such as orbital data centers.

The fundamentals of Starlink are relatively solid. According to the S-1 document, Starlink's revenue is expected to grow by 50% year-on-year to $11.3 billion by 2025, with operating profits exceeding $4.4 billion, and user numbers have surpassed 10 million, making it SpaceX's only profitable business segment at present. However, even so, with a valuation of $1.75 trillion, SpaceX's total revenue in 2025 is about $18.7 billion, corresponding to a price-to-sales ratio of nearly 100 times.

Musk responds from afar: "Just wait and see"

In the face of valuation doubts, Musk chose to respond with Tesla's history. He posted on the X platform early Tuesday morning, stating, "Tesla's market value at its IPO was only 0.1% of its current value." When asked by users how to defend against a valuation that exceeds a 50 times price-to-sales ratio, Musk simply replied with three words: "You shall see."

However, there are obvious issues with the analogy. According to Yahoo Finance, Tesla's current market value is about $1.3 trillion, with a price-to-sales ratio of about 15.7 times and a price-to-earnings ratio nearing 400 times. Even when measured against Tesla's already high valuation standards, SpaceX, searching for a higher market value with far lower revenue scale, clearly faces a higher pricing threshold.

Scott Galloway, a professor at NYU Stern School of Business and a co-host of a podcast, used sharper language. According to Motley Fool, he described SpaceX's IPO filing in an article as "not serious, hollow, delusional, and almost dishonest."

Tiered Unlocking + Fast Nasdaq Inclusion: Short-term may rise then fall

Despite giving a bearish valuation, Morningstar also acknowledges that SpaceX's stock price may still rise in the short term after the IPO. There are three logical reasons: the initial float is extremely low (only about 3% of shares are publicly offered), strong demand from investors for AI infrastructure targets, and the fast inclusion mechanism of the Nasdaq 100 index.

According to CNBC reports, Nasdaq's new rules introduced on May 1 allow super-large newly listed companies to be included in the Nasdaq 100 index after only 15 trading days following their IPO, and SpaceX meets this requirement with its expected valuation. Once included, all passive funds tracking that index will be forced to buy, creating a wave of short-term index inclusion buying.

But mid-term selling pressure is also worth noting. SpaceX has adopted an unconventional tiered unlocking structure: after the company's first quarterly report post-IPO (covering April to June), insiders can sell up to 20% of their locked shares; if the stock price rises by more than 30% from the issue price by then, an additional 10% can be unlocked. After that, on days 70, 90, 105, 120, and 135, another 7% will be unlocked each time. After the third quarterly report is released, 28% will be unlocked, with the remainder fully unlocked 180 days post-IPO. Musk himself is subject to a 366-day lock-up period.

According to the revised S-1 filing, SpaceX has also reserved up to 5% of IPO shares for designated employees and executives, and this group of holders is not subject to the standard lock-up period. Motley Fool analysis suggests that investors do not need to rush to enter on the first day of the IPO; waiting until all unlocking terms expire and index inclusion is complete may be wiser.

$20 billion bridge loan and governance risks

Morningstar has also noted two structural risks.

One is that the debt accumulated by SpaceX in recent years is mainly related to investments in AI infrastructure, with $20 billion existing as a bridge loan due to mature 15 months after the IPO, representing refinancing risk. Morningstar estimates that the company will raise $50 billion to $80 billion through the IPO, some of which will be used to repay this loan.

The second is corporate governance issues. Musk holds about 85% of the voting rights through a dual-class share structure. Furthermore, the acquisition of xAI for $250 billion earlier this year was not conducted at arm's length, the related party transaction inflated SpaceX's valuation from about $1.5 trillion to the IPO target level, but the AI business itself has yet to prove its economic viability.

SpaceX plans to launch its roadshow in the week of June 8, set a price on June 11, and begin trading on Nasdaq under the code SPCX on June 12. This will be the largest IPO in history and may also be the most contentious one in recent years.