Elon Musk's rocket and satellite company SpaceX has confidentially filed for an initial public offering with the Securities and Exchange Commission, sources told CNBC's David Faber on Wednesday. The firm could seek a valuation of $1.75 trillion with a public listing around June, Bloomberg reports, citing people familiar with the matter. A confidential filing means that SpaceX will submit its financials to the SEC before revealing them to the public, which must occur at least 15 days before the IPO roadshow — a series of presentations to attract potential investors. In general, investors have reason to be enthusiastic about getting in on the proverbial ground floor of a newly public company. From 1980 through 2025, stocks have popped by an average of 19% from their offering price on the first day of trading, according to data from Jay Ritter, director of the IPO initiative at the University of Florida. And few public offerings are likely to be as buzzy at this one. SpaceX is reportedly looking to raise up to $75 billion, which would make it by far the largest U.S. debut of all time, a title which currently belongs to Alibaba's $22 billion offering in 2014. Under certain circumstances, experts say, there is short-term money to be made investing at the very beginning of an IPO. But because of the potential for volatility, longer-term investors should tread carefully, and may want to take a more cautious tack. "We've always taken a wait-and-see approach to that market," says Josef Schuster, founder of IPOX Schuster, an investment and research firm focused on IPOs. If you want to get in on SpaceX, or any IPO, you'd be wise to do some homework on how these stocks tend to behave, Schuster and other experts say. Here's what they say you need to know.
How to invest in IPOs
While IPO shares tend to rise on the first day of trading, it's no guarantee, and about 25% decline in value, Ritter says. Plus, Ritter's data uses a price you may not be able to get: the offering price, which is the price set by the IPO's underwriters before the shares hit a public exchange. Offering-priced shares aren't typically available to retail investors, Ritter says, particularly for "hot" IPOs where he estimates 95% of shares go to institutional investors. Across all IPOs, Fidelity pegs the split between institutional and retail investors at 90/10. SpaceX is reportedly planning to buck this trend by making as much as 30% of the offering available to retail investors, Bloomberg reports. If you're interested in getting offering-priced shares of SpaceX, it will be worth monitoring whether your brokerage has access to the offering, Ritter says. If you're unable to get shares at the offering price, you'll have to buy them once they're publicly available. And once shares hit the market, there's no telling how any given IPO stock will behave, Ritter says: "On average, the open-to-close return is about zero."
What to consider before investing in an IPO stock