‘Would love to own it, but…’: Aswath Damodaran flags $1.75 trillion valuation for SpaceX ahead of IPO

The much-anticipated IPO of SpaceX is already generating buzz for good reason. With the business spanning rockets, satellite business and artificial intelligence, the company sits at the intersection of most futuristic industries and has no peers.

Add to the mix its founder and CEO Elon Musk, who is also the world's richest man, and the listing will undoubtedly be the most-talked-about market event in recent years.

But while excitement runs high, valuation guru Aswath Damodaran is urging caution. His view is that, undoubtedly, SpaceX is a great company, but not a great investment at any price.

Damodaran's valuation of SpaceX

Market chatter pegs SpaceX's valuation at a whopping $1.75-2 trillion, making it the world's most-expensive IPO in history. But the big challenge in valuing SpaceX is the lack of detailed financial information.

There is very little that we know about the company's financials, and its prospectus is not public yet, Damodaran said in a post on X today, 24 April, adding that there are also no comparable firms. Yet that did not stop him.

Damodaran attempted a “best estimate” valuation using available information. His base case puts the company’s value at around $1.22 trillion, "about 10% below the private market pricing and about a third below the expected IPO pricing, but still astonishingly high for a company with $15.5 billion in revenues in the most recent year," said the market guru.

He said that $1.75 trillion or even a $2 trillion pricing, there is little or no upside left for an investor paying that price.

Damodaran, throughout his blog post, has repeatedly mentioned that valuing a company like SpaceX is inherently uncertain. His estimates are based on multiple assumptions about growth, margins and investment needs over the next decade.

The Musk factor

Any discussion of SpaceX inevitably involves Elon Musk. Damodaran describes companies led by Musk as “shape-shifting" and "frustrating for investors", expecting that with Musk in full control, SpaceX will follow an unpredictable path.

"SpaceX is an engineering marvel that has shown its naysayers, who included almost every luminary in the space community, to be wrong. That said, for potential investors, there are lessons to be learned from watching Musk's stewardship of Tesla," said Damodaran.

‘Great company, not at this price’

At the heart of Damodaran’s argument is valuation discipline. While he calls SpaceX an “engineering marvel” with strong competitive advantages, he is wary of the rumoured IPO pricing of $1.75 trillion to $2 trillion.

SpaceX is a unique company with immense competitive advantages, and while I would not be interested in buying at the rumoured IPO pricing of $1.75 trillion, it is one big correction away from being fairly priced or even cheap, Damodaran said.

In case of a correction, Damodaran is convinced that he will be a buyer, but will do so "with the recognition that this company comes packaged with a founder who is both uniquely gifted and deeply flawed".

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.