SpaceX went public last month as the largest IPO ever by market cap, but the stock has already dropped nearly 21% from its June 16 peak. History suggests a plain S&P 500 ETF may be the steadier bet: eight of the ten biggest U.S. IPOs have trailed the index since listing.
History hands mega-IPO buyers a blunt verdict, and SpaceX now sits squarely in that pattern. The stock, trading as Space Exploration Technologies, is down nearly 21% from its peak on June 16 after debuting last month as the largest initial public offering in history by market cap. Some investors still expect it to skyrocket once it settles; others doubt it can thrive over time.
What history says about mega-IPOs
The track record is not kind to giant listings. Eight of the top 10 largest U.S. IPOs have underperformed the S&P 500 since going public, according to FactSet Research. Collectively, those 10 stocks have fallen short of the index by a median of 127 percentage points since they began trading.
Early trading tells you little about the finish. Meta Platforms is one of only two of those companies to beat the index, yet its shares rose just 1% on their first day. Coinbase Global did the opposite: it surged 31% on its first day and has since trailed the S&P 500 by 136 percentage points. None of this guarantees SpaceX will fall short — each stock is unique — but larger IPOs don't always have a leg up on long-term returns.
Why the index ETF looks steadier
The choice comes down to risk tolerance. SpaceX carries plenty of unknowns: the company is not yet profitable and already overvalued on key financial metrics, and some of CEO Elon Musk's aims — data centers in space, a million-person colony on Mars — are ambitious. If those goals land, the payoff could be large, but the near term is likely to stay volatile.
An S&P 500 ETF offers the opposite profile, with decades of positive total returns despite short-term swings. Because SpaceX is not yet in the S&P 500 — and won't be for at least a year, assuming it turns profitable — the fund also gives investors a clean way to sidestep the company entirely.
Source: The Motley Fool
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