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I see a thousand possible futures, but in none of them does buying SpaceX shares today look like a good deal.
I believe the SpaceX IPO could be the biggest stock market gamble in history. Bigger than anything we have seen in our lifetime. In my opinion, investors who buy at these prices risk losing a large part of their capital.
The company has about $18 billion in revenue, loses around $5 billion a year, and is valued at $1.75 trillion. That is about 94 times annual revenue for a money-losing business. This price reflects dreams of a Mars colony, asteroid mining, and, most importantly, Elon Musk's charisma and genius, rather than the actual value of the business.
It immediately reminds me of Cisco. In 2000, it was the most valuable company in the world. The internet was changing everything. People dreamed about millions of computers, and Cisco supplied the equipment for the new digital economy. Reality turned out even better than expected. Today there are not millions of computers, but billions, and many of them sit in our pockets.
Cisco was a great and profitable company. But investors who bought its shares at the peak quickly lost about 90% of their money. The company kept growing its profits and sales, yet it took investors about 25 years just to break even.
Maybe it is only a coincidence, but there are too many similarities. In 2000, Cisco's revenue was about $19 billion. Today, SpaceX revenue is almost the same. Back then, Cisco's market value was about 5% of U.S. GDP. Today, SpaceX is also valued at about 5% of U.S. GDP.
But there is one major difference. Cisco was profitable. SpaceX is still losing money, even as its valuation moves toward $2 trillion.
That is why I believe we are not watching the birth of the best investment opportunity of the decade. We may be watching one of the biggest speculative stories in stock market history.