The $17 billion mistake hidden inside SpaceX’s blockbuster IPO

The absolute dollar amounts that SpaceX (SPCX) sacrificed in going public, however, are staggering and precedent-shattering. Put simply, Elon Musk’s creation stands in urgent need of tens of billions to fund the giant capital expenditures required to power what it acknowledges as its principal growth engine, its new AI franchise. The towering sums that flowed in one-day profits to privileged investors who got shares at the IPO offer price on the cheap—and may reward the bankers who steered them those allocations by sending back lucrative, “soft dollars” trades—would have provided a lot more rocket fuel in the tank to sustain what Musk advertises as the fastest takeoff in the annals of capitalism.

From one viewpoint, the opening jump looks modest. On June 12, SpaceX shares spiked from the offer price of $135 to close at $160.75, a lift of 19%. According to stats assembled by Jay Ritter, the University of Florida professor who is the world’s leading expert on IPOs, the percentage increase precisely matches the average bump over the last several decades. Plus, because the markets valued SpaceX at $2 trillion by the first day close, the amount of “left on the table,” the difference between the total dollars the enterprise would have raised had it captured the $160.75 the funds and folks were willing to pay, and the $135 pre-fee number Musk put in the treasury, tallies to a seemingly non-shocking 0.8% of SpaceX all-in market cap.

Still, the count of foregone billions reigns as by far the biggest in IPO history for ordinary share offerings. Ritter provides extensive rankings for the largest amounts left on the table. His official number for SpaceX is $14.5 billion. But Ritter’s methodology targets the one-day figure. He doesn’t include the “over-allotment,” or “Green Shoe,” of an extra 15% that the issuer awards the banks at the IPO price for distribution to the same investors if the shares rise on day one; if the IPO tanks, the underwriters blunt the selling and act as a stabilizer by re-purchasing the extra 15% at the higher offering number. As Ritter told Fortune, the total proceeds SpaceX won’t collect, measured through the time the Green Shoe shares are dispensed, will be $16.7 billion ($14.5 billion plus 15%).

The $16.7 billion that SpaceX effectively sent elsewhere is almost triple the former record of $5.9 billion, set in the 2008 Visa offering. In fact, for only five IPOs did the first day pop (including the Green Shoe) exceed $4 billion. The total for the former first four on the list, Visa, Airbnb (2020), Cerebras Systems (2026), and Snowflake (2020) barely surpasses the rocket and AI giant’s mark. (The 2014 offering of Alibaba left over $9 billion on the table, still just over half the SpaceX total, but isn’t included in Ritter’s table since it deployed ADRs not regular shares.)

The $16.7 billion left on the table represents a big cost for SpaceX’s business, and is only small vs its celestial valuation

While the marvel of SpaceX’s never before witnessed $86 billion raise (including the 15% over-allotment) and $2 trillion-plus market cap got all the buzz for their over-the-top bigness, its fundamental numbers as an ongoing business are small. Last year, SpaceX posted a mere $18.7 billion in revenue, just 12% more than what the day one leap delivered its IPO investors.

What hurts most: SpaceX is short on future funding for its ultra-costly ramp in AI. Last year, the capex dedicated to AI amounted to $12.7 billion, absorbing 81% of its expenditures on plant and equipment. In Q1, the outlays for data centers, GPUs and the like jumped to $7.7 billion, and the S-1 filing strongly implies that they’ll swell rapidly from there. As the document advises on page 12, “Our AI business is in a relatively early stage, it is being integrated into our organization, its business strategy is still developing, and it will require significant capital expenditures to fund compute, infrastructure and power generation, model training, and product development.”

Even now, SpaceX isn’t generating nearly enough cash from operations to support the vast AI expansion initiative. In the past five quarters, it’s lavished $31 billion on capex, four times the cash collected from running its businesses. Reason: The deep operating losses in AI, alongside lesser deficits on the rocket side, are dwarfing profits from its one money-spinning franchise, the robust Starlink satellite mobile and broadband arm.

To make matters worse, most of the vaunted sums amassed from the IPO are spoken for. The S-1 disclosed that SpaceX has committed $62.6 billion, or 71% of the $86 billion raised in the offering and Green Shoe, for amounts owed to several parties, including the repayment of a loan from Tesla, Musk’s second largest holding, and to EchoStar for “Spectrum Acquisition Closing.” That leaves just $23 billion available for covering AI capex.

At the end of Q1, SpaceX was sitting on cash of $24 billion. Hence, the IPO take plus those reserves total less than $50 billion. The AI spending on capex and R&D are accelerating so fast that SpaceX could easily burn through that number in less than a year. That’s why the $16.7 billion that went to the investor windfall, and not to SpaceX, is so important. Getting that money would have bolstered SpaceX’s $50 billion war-chest by one-third.

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