What the SpaceX IPO means for markets

• SpaceX filed paperwork to go public on Wednesday.
• The IPO is expected to be monumental, with impacts beyond the investors gunning to get exposure.
• Major stock indexes, market liquidity, and the wider IPO outlook will be affected by the offering.

The SpaceX IPO is set to reshape the stock market.

Elon Musk's rocket company filed paperwork for its long-awaited offering on Wednesday, set to list on Nasdaq under the ticker SPCX. The S-1 filing is the first look inside the company's finances, its revenue streams, and its expectations for the future of the business.

But there are implications for markets beyond just the IPO price or where the stock starts trading. The offering will likely be the largest in history. Given that scale, it'll be an important event even for investors who might not be aiming to snap up shares once trading begins.

Here's how the historic offering could shake up the whole stock market.

The fast track to the Nasdaq

Even before it filed to go public, SpaceX was rewriting the rules.

The Wall Street Journal reported earlier this year that SpaceX had been reaching out to index providers to allow quicker entry into major stock indexes.

After a consultation and comment period, Nasdaq's "fast entry" rule went into effect on May 1. It whittles down the time for newly public companies to join the Nasdaq 100 to 15 trading day. Previously companies were waiting as much as a year to be considered.

This means that funds that track the index, like the popular Invesco QQQ ETF, will be buying a lot of SpaceX stock quickly.

The rule has received some criticism. George Noble, a longtime Fidelity fund manager with decades of experience on Wall Street said the change amounted to index manipulation.

""Currently, new public companies typically wait up to a year before they're eligible for major index inclusion," he said. "That waiting period exists for a reason. It lets the market establish real price discovery. It protects passive investors from being forced into untested, illiquid stocks."

There is over $1.4 trillion of exposure to the Nasdaq 100 through ETFs, mutual funds, and other investment tools. Any investors in the index are likely to be exposed to SpaceX shortly after the company goes public.

Mega IPOs add to an already top heavy market

Market concentration worries have emerged among some investors and SpaceX's IPO will only amplify these fears.

At a $2 trillion valuation, SpaceX would be among the largest companies in the world by market cap.

Apollo's chief economist, Torsten Slok, warned that the concentration of the 10 largest companies could near 50% if Space X along with AI giants, OpenAI and Anthropic, all go public this year as expected.

Market concentration at the top sets the equity market up for volatility as investor pile into tech in the AI era. This dynamic was on display earlier this year when AI hype soured and fueled big losses in AI stocks as well as the broader market indexes.

Due to their sheer size, when one of these mega-cap giants rises or falls sharply, it can move the entire index. SpaceX's historic valuation will give it an outsized impact, which could subject index investors to any post-IPO volatility in the stock.

Reshuffling investor cash

There's a glass half full and a glass half empty way to look at the impact of SpaceX's IPO on investors cash.

Due to scale of Space's public trading debut, the IPO is expected to drain some liquidity from the market in the near term. The IPO comes as investors are already holding historically low levels of cash, meaning they're close to fully invested.

This could make for a tough setup for other large companies that are aiming to go public this year, like OpenAI or Anthropic, as investors have less money on the sidelines to commit to new offerings.

Further out, the IPO could actually add liquidity to the market by unlocking the huge sums of VC cash that have been sitting on the sidelines which SpaceX has been private, Ross Carmel, a partner at capital markets law firm Sichenzia Ross Ference Carmel, said.

"Venture capital and the secondary markets have been investing in SpaceX for over two decades. There are hundreds of millions of dollars which are about to become liquid and then put to use on other company's in need of capital, both public and private," Carmel said.

Setting the scene for IPOs to come

The IPO market has been pretty sluggish for years. After a frenzy of dealmaking in 2021 amid the pandemic and the SPAC boom, the bear market of 2022 dashed many firms' hopes of going public. Since then, the IPO market has come back slowly.

SpaceX and other mega offerings in the works could get investors excited about companies going public again. The appetite already appears to be there, evidenced by chipmaker Cerebras Systems' huge rally on its first day of trading last week.

"I expect that the SpaceX IPO will be the high tide that lifts all boats, resulting in flood of new IPOs, and all-time highs in the market," Carmel told Business Insider.

On the other hand, an IPO flop, or even a mild disappointment, could cause enthusiasm to fizzle.

"The size of the deal, and the market's exposure to it, will likely color appetite for other large mega-cap tech listings, particularly Anthropic," Samuel Kerr, head of global ECM at Mergermarket wrote.

"If Space X soars in trading, then it will likely boost Anthropic's chances of similar success as investors pile in for more transformational growth stories," he said. "If however, Space X disappoints, and leads to sizeable investor losses after IPO, it could dampen demand for businesses also asking investors to put faith in exponential future growth. If that happens it might lead Anthropic to postpone IPO plans or reset valuation expectations."

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