SpaceX is shaping up to be one of the most awaited IPOs in Wall Street’s history. The company’s Starlink satellite network, reusable rocket systems, deep government relationships, and commercial momentum make it one of the rare private companies with a credible high-growth story.

According to Reuters, SpaceX is targeting a $1.75 trillion valuation, implying a price-to-sales (PS) ratio close to 100. At that valuation, public investors may be paying for years of success before that success is fully proven.

Although SpaceX is clearly an impressive company, investors still need to ask whether it can be an equally impressive investment.

One indicator gives a warning

Jay Ritter, also known as “Mr. IPO,” has long studied IPO performance. His data (broadly covering U.S. IPOs from 1980 through 2025) shows that among IPOs with more than $100 million in sales and a P/S ratio above 40 at the offer price, 12 of 14 underperformed the market over the next three years if bought at the first closing price. The only exceptions were Mobileye Global and Astera Labs, which show that fundamentally strong companies can beat the pattern. Yet, history suggests investors buying such richly valued IPOs have usually been better off waiting or looking elsewhere.

SpaceX’s expected PS ratio of nearly 100 means investors would be paying for an exceptional growth story and near-perfect execution.

Risks to watch

Starlink’s subscriber base expanded from 2.3 million at the end of fiscal 2023 to 8.9 million at the end of fiscal 2025, and then to 10.3 million at the end of the first quarter of fiscal 2026. However, average revenue per subscriber (ARPU) per month fell from $99 in fiscal 2023 to $81 in fiscal 2025, and further to $66 in the first quarter of fiscal 2026. SpaceX has attributed the ARPU decline to lower-priced plans and expansion beyond North America, where average prices are typically lower. At a P/S multiple of nearly 100, Starlink must prove it can expand globally without turning the business into a low-margin telecommunications player.

The Starship reusable rocket system is also expected to be an important growth catalyst for SpaceX. Starship’s latest test flight, the 12th since 2023 and the first for the upgraded V3 version, hit most of its major objectives. That progress toward a more reliable launch system matters as Starship could help SpaceX launch more Starlink satellites at a lower cost and support larger future markets. But the system is not fully proven yet. Continued delays or technical setbacks could make it harder to justify the premium valuation.

SpaceX is also not yet profitable. Starlink generated operating profit in the first quarter, but SpaceX still posted a $1.94 billion operating loss on $4.69 billion in revenue. While SpaceX may soon start generating durable cash flows, the rich valuation leaves less room for any execution missteps.

This does not mean that SpaceX is destined to flop. The company may be one of the rare businesses capable of growing into a massive valuation. But at nearly 100 times sales, SpaceX’s downside risk also cannot be ignored.