High-flying IPO, high-flying hype: Reuters reported that the SpaceX IPO is 3.3x oversubscribed as of yesterday, but I wouldn’t believe a word from anyone buying or selling into this IPO. When Google announces it will pay $920 million per month to rent xAI’s idle GPU capacity just 5 trading days before the IPO, you can smell the desperation. Google doesn’t need GPUs, but it does need exit liquidity, as it owns a 5% stake in SpaceX with a 17,900% RoI. The Street wants you believe that AI will be the growth driver over the next 5 years, but this implies that Grok can overtake frontier market leaders like Google, OpenAI, and Anthropic. Musk is hellbent on doing this, so there’s no way to avoid huge cash burn until he can achieve this.Beware of the options market on a purposefully executed “low-float, high-valuation” IPO, meant to create both a passive flow squeeze, and a huge gamma squeeze after SpaceX’s options market opens on day 4 or 5 after the IPO. Beware of early, unlocked selling if you’re long SpaceX, and hope that the Vested Interests “sway” the share price higher—the way they do with Tesla—after passive buying ends on day 15 post-IPO. Musk’s “tiered” unlocked selling schedule starts the day after Q2 results, and will allow 13%+ of early SpaceX investor shares to be unlocked to sell. Realize that both Anthropic and Google can begin exit procedures from their GPU leasing agreements with xAI as of December 2026, which means that earnings could return to losses from Q1 or Q2 2027. The “Telsa-SpaceX” merger speculation has almost become consensus. Assuming this is Musk’s game plan, it will take at least 3 to 4 quarters of regulatory reviews, and you can bet that the Tesla bagholders will start an activist revolt to demand much higher merger ratios, which would prolong the event even further. See my deep dive into SpaceX’s IPO here, and why it makes more sense for SpaceX to cancel its IPO for a 1:1 merger with Tesla here. For my take on SpaceX’s S-1 filing, see this report here. ====================================================================When Jamie Dimon, JPMorgan’s iconic CEO, asked Elon Musk at an investor meeting last week why SpaceX is going public now, Musk smiled and replied, “We’re embarking on a massive new growth phase, and we need capital for that.” This isn’t exactly true. In fact, it’s as close to a lie as one can get without lying, given that the $75 billion of funds that will be raised by SpaceX’s IPO will go to pay down liabilities linked to Musk’s failed AI start-up, xAI: xAI, was burning cash at a rate of over $1 billion per month last year, with minimal revenue. While segment cash flows aren’t disclosed, the EBITDA less capex in SpaceX’s AI division last year came to a $15.5 billion deficit. On top of this cash incineration, xAI has huge investment needs: including supplemental capex, xAI saw total investment outlays of $23.4 billion in Q1 2026, with only $0.8 billion of revenues, eclipsing last year’s total of $19.8 billion of capex, on $3.2 billion of revenues. Most of this was GPUs and equipment needed to build out 2 massive data centers for xAI. xAI and Twitter were drowning in debt that carried 11.4% interest rates and required nearly $2 billion in servicing costs last year. SpaceX replaced this in March with a $20 billion bridge loan, at a much more reasonable rate of 4.6%. Nevertheless, including $10.2 billion of high-yielding AI-related financing that xAI used to carry it through Q2, 40% of SpaceX’s $75 billion IPO will go to pay down its AI debt, while much of the rest will be needed to cushion the cash burn for the rest of the year. Goldman Sachs estimates that SpaceX will burn through $350 billion of cash through 2030, or $70 billion per year on average, before generating positive cash flow. If Goldman's cash burn estimates sound aggressive, think about it this way: on user enjoyment benchmarks, xAI ranks 4th among frontier labs, but on tests that enterprise buyers actually care about, rigorous reasoning and autonomous task completion, it ranks last (see Figure 1). That gap is what the immense cash burn is funding: a bet that SpaceX can leapfrog Google, OpenAI and Anthropic to reach 1st place. From this standpoint, Goldman’s estimates of $350 billion in AI cash burn through 2030 may be slightly optimistic. Figure 1: Frontier AI Lab Rankings by Benchmark (June 2026)Sources: Stanford HAI AI Index Report 2026; LMSYS Chatbot Arena; LLM Stats; Scale AI SEAL Leaderboard; ARC-AGI Prize leaderboard. Rankings are publicly available scores as of June 2026 and can change as new models are released.In light of this, SpaceX could run through its $75 billion IPO proceeds as soon as Q1 or Q2 next year, especially if both Google and Anthropic cancel their GPU rental deals with xAI, which appears to be the case (more details below). And this is before factoring in Musk’s ambitions of building a “Terafab” to build cheaper chips than TSMC, which would cost upwards of $60 billion just for the initial phase. This is why it’s hard to believe that Musk would’ve taken a debt-free, highly profitable SpaceX public if its “Frankenstein” of an AI division didn’t exist. IPO is only 3.3x Oversubscribed a Day Before Books Close Reuters reported yesterday that bookbuilding so far has reached $250 billion, which is only 3.3x oversubscribed, with only a day left before books close after today’s market close (link here). While various press reports, including the Reuters article, say this is an indication of “strong” demand, given the record funds being raised, it seems a bit underwhelming in light of all the hype since January and 2 extra days of marketing (the roadshow launched on June 4th rather than June 8th, as the SEC finished their review earlier than expected). Also, looking at the top global IPOs in Figure 2 (which shows inflation-adjusted funds raised), it’s clear that, while the deal size of IPOs like ICBC and Meta may have been smaller, their huge oversubscribed rates of 45x and 25x, respectively, show how much more popular they were than SpaceX. Figure 2: Top 10 Global IPOs Ranked by Oversubscribed Rates Source: Bloomberg and various press reports. * Note: All values are inflation-adjusted for today’s prices. ** Also note that Price/Sales multiples use trailing 12-month revenues. Moreover, Musk clearly had Google step in to sign a last-minute deal with xAI, in a shameless attempt to pump the IPO, which was only 2x oversubscribed last week, and not a good sign even after its $75 billion size is considered. Google GPU rental deal: After last Friday’s market close, SpaceX announced a deal with Google, where xAI rents 110,000 of its GPUs at its Colossus 1 data center to Google for $920 million per month, or $11 billion per year through 2029. This is exactly half the size of a similar deal announced with Anthropic on May 6th (220,000 GPUs for a monthly fee of $1.25 billion, or $15 billion per year), and combined, would lead to an annual revenue stream of $26 billion, which is nearly 40% higher than SpaceX’s total 2025 revenues of $18.7 billion. With an estimated operating margin of around 65%, this could have turned last year’s consolidated operating loss of $2.6 billion at SpaceX into a profit of $14.3 billion, which is quite significant. But this kind of announcement, just 5 trading days before the largest IPO in history, is actually as unserious as one would expect, once you look at the details: Google doesn’t need xAI’s GPUs: Google described this deal as "bridge capacity to meet surging customer demand for our agent platform, Gemini Enterprise." Bridge capacity, by definition, is temporary, and the deal term says that, after December, Google or xAI can cancel the agreement with 90 days’ notice. But why announce this a week before the IPO?Google owns a 5% stake in SpaceX: After investing around $500 million in SpaceX in 2015, when SpaceX was valued at only $10 billion, Google’s current stake is worth nearly $90 billion at the IPO price of $135/share. This is a 17,900% RoI for Google. It should also be of no surprise that most queries about SpaceX on Gemini 3 lead to highly positive takes on the IPO, unlike replies to questions about Tesla robotaxis versus Waymo, which are much more objective. The Anthropic deal was also walked back by Musk, who commented that the $1.25 billion monthly GPU rental agreement with xAI “is a 180-day lease with 90-day notice mutual cancellation. The short term was our request, not Anthropic’s.” This led to the S-1 filing being amended to match Musk’s statement, so Anthropic’s deal is on a “rolling 90-day schedule” from August, as it has its own AI infrastructure coming online by the following schedule: Q4 2026: Anthropic’s AWS capacity arrives—first alternative to xAI’s GPUs.December 2026: Over 1GW of Google TPU capacity comes online. December 31, 2026: Google’s 90-day termination window opens on the xAI contract.Q1–Q2 2027: Google/Broadcom TPU capacity begins flowing to Anthropic.The 1GW+ of Google TPU capacity arriving by the end of 2026 is sufficient on its own to replace the inference workloads now running on xAI's 220,000 GPUs (TPUs are said to be perfect for this type of large-scale transformer inference). Combined with the existing AWS Trainium capacity already running, Anthropic won’t need xAI’s GPUs before the end of December. Analysts Struggle to Make Estimates Fit Valuation Because of Musk’s insistence on the nose-bleed valuation of $1.77 trillion for the SpaceX IPO, analysts at the investment banks that are underwriting the offering are struggling to make the maths in their estimates work. And while Starlink in the Connectivity Segment is the crown jewel of SpaceX’s growth and profits (EBITDA grew by 86.2% YoY last year and made up 109% of total 2025 EBITDA), the analysts at Goldman Sachs and Morgan Stanley are pouring their efforts into showing how much the cash-burning AI Segment will grow. Research analysts across Wall Street are telling would-be SpaceX IPO buyers that they’re modeling for the company’s artificial intelligence division to see 100 times revenue growth at the end of the decade, to help justify a targeted $1.8 trillion valuation.“Wall Street Sees SpaceX’s AI Revenue 100 Times Higher by 2030”, Bloomberg News (June 4, 2026) Goldman Sachs is the lead underwriter, while Morgan Stanley is playing second fiddle, which is surprising given how much more of a Tesla cheerleader Morgan Stanley has been. Both made headlines last week as a few of their estimates were leaked to the press, and they’re notable, just to see how far these banks are willing to go in order to flog more SpaceX shares to their clients: 2030 vs 2025 RevenuesGS: $18.7 billion—>$474 billion (+25.4x)MS: $18.7 billion—>$330 billion (+17.7x)2030 vs 2025 AI Segment RevenuesGS: $3.2 billion—>$322 billion (+100.6x)MS: $3.2 billion—>$190 billion (+59.4x)2030 vs 2025 EBITDA & EBITDA MarginGS: $6.6 billion—>$352 billion (+53.5x); EBITDA margin: 35.3%—>74.2%MS: $3.2 billion—>$230 billion (+34.9x); EBITDA margin: 35.3%—>69.7%Assuming SpaceX net debt is flat by 2030, despite the AI segment’s cash furnace, and the listing price of $135/share, Goldman’s estimates lead to the trailing 12-month EV/EBITDA of 267.6x coming down to 5.0x by 2030, while Morgan Stanley’s assumptions get you to a 7.7x multiple. Again, to assume that xAI can disrupt the incumbent frontier market leaders like Google, OpenAI, and Anthropic over the next 5 years without taking bigger hits to earnings is a bit hard to imagine: xAI has spent over $25 billion on GPUs since 2023, by my estimates, and the first batch of these will need to be replaced by higher-performing new GPUs on the market from the 2H of 2027. Figure 3 below compares SpaceX’s earnings results to what they would be without its AI Segment, just to drive this point home. Figure 3: SpaceX Earnings With & Without its AI SegmentSource: SpaceX & MH estimates. Ex-AI Segment numbers assume flat net interest expenses, and a 21% effective tax rate. Musk’s Engineered “Passive Squeeze” and the Wall of Insider SellingThere’s been a lot of controversy over Musk’s push to get various indexes to scrap their usual rules on inclusion for newly listed companies, and grant SpaceX early inclusion. Among the larger exchanges, the “bend the knee to Elon” crowd includes MSCI, the Nasdaq 100, Morningstar/CRSP, and the FTSE Russel 1000. From day 5 after the IPO through day 15, these are the key indices that will lead to funds that track them to buy SpaceX shares, whether they like the stock or not, in one trading session (except for CRSP, which will spread its estimated $1.8 billion of buying over 5 days), which will create a “passive squeeze”, and likely push the stock higher. True to his moneygrubbing style, Musk has purposefully limited the amount of SpaceX shares to be offered in this Friday’s IPO to only 4.3% of total shares outstanding, in order to execute a “low-float, high valuation” strategy that will push SpaceX shares higher. By comparison, megacap tech stocks like Meta (Facebook) listed 15.4% of their shares when they went public in 2012, while Alibaba floated 13% of its shares in its 2014 IPO. S&P 500 Doesn’t Bend the Knee to MuskBut Musk finally met with some karma, however, when the S&P Index Committee announced on June 4th that they wouldn’t change any of their inclusion rules for SpaceX. This was a pretty big slap in the face, as passive flows are estimated to have been around $40 to $50 billion, versus SpaceX’s float of around $75 billion, which would likely have led to circuit breakers going off throughout the trading session. Given the 12-month seasoning period in SpaceX trading which is required by the S&P Index Committee, it likely won't have a chance to be considered until June 2027 at the earliest, and must also show 4 quarters of cumulative GAAP net profits, with the final quarter being in the black. Unless Anthropic and Google are still renting GPUs from SpaceX (highly unlikely, given both won’t need xAI’s GPUs after December), it’s hard to see SpaceX being profitable next year. Figure 4 below shows the main indexes that will have an impact from day 5 after the June 12th IPO, and day 15, when the Nasdaq includes SpaceX. In total, there should be around $14 to $15 billion of passive flows during these 7 trading sessions, which doesn’t sound like much when you consider that Tesla trades on average around $22.5 billion per day. However, Tesla’s free float is around 83% of its shares outstanding, so its daily traded value amounts to only 1.8% of its float. For SpaceX, the $15 billion or so in passive flows between day 5 and day 15 amounts to 20% of its float. For the far right column in Figure 4, I assumed that the daily turnover will initially be around $27 billion, which is 36% of its float, but it could be higher given the high volatility (details below). Figure 4: Key Indexes for the Day 5 to Day 15 “Passive Squeeze”Sources: Nasdaq Index Metrics; MSCI Global Standard Index Early Inclusion Notice (June 8, 2026); CRSP Market Indexes & FTSE Russell IPO Inclusion Frameworks; Bloomberg Intelligence & BNP Paribas Liquidity Flow Analysis. *Note: CRSP is spreading its inclusion of SpaceX over 5 trading sessions. Also note that trading volume is estimated to be $27 billion per day. Gamma Squeeze From SpaceX Options Market From Day 4 or 5Anyone who’s traded Tesla before is keenly aware of how much the stock is “swayed” by the Vested Interests via the options market, namely huge volumes in weekly calls with near-the-money strikes. It seems like SpaceX will be like Club Med for the Vested Interests, given its small float, which Musk’s financial advisers surely flagged to him. Expect the following trends: High implied volatility of over 100% during the first week or two, due to market makers finding inventory, etc. with such a small float, and wide bid-ask spreads. This will likely drop into the first quarterly earnings results (Q2 2026) some time in late July or early August. Gamma sensitivity during the first several weeks could lead to mayhem in light of the expected high allocation to retail investors (who might leverage more by use of call options), and SpaceX’s thin float, which will exacerbate moves in the stock. Don’t Forget About Exit Liquidity: Early Tiered SellingFigure 5 is a nice visual that help explain another unique aspect of SpaceX’s IPO, which is its strange schedule for early investors to be unlocked and allowed to sell. Usually, there’s a 180-day lockup period, but because there are early investors who’ve been waiting for over 12 years, Musk provided the “tiered” unlock schedule in Figure 5, which has a “Pool A” for early investors (private equity, venture capital, etc.), and a “Pool B” for insiders and executives, which ends 366 days after the IPO. Here are the key points: “Friends & Family” tranche is 5% of IPO offering from day 1, which could weigh on the share prices in the absence of passive flows from day 5 after the IPO, and the options market not established yet. Assuming this is worth $3.75 billion of selling—if they all sell—it could amount to 10-15% of average daily volume until passive flows and call buying begin. Selling of 20% of one’s holdings will start the day after Q2 2026 results, which should be in either late July, or early August. If SpaceX trades at or 30% above its IPO price of $135 in 5 of any of the 10 days before Q2 earnings results, early investors can sell an extra 10%. Roughly 7% of Pool A’s tranche to be unlocked between August 21st and October 25th (days 70, 90, 105, 120, and 135). Another 28% of Pool A shares unlock after Q3 earnings, which may sound like a great selling/shorting opportunity, but it coincides with the Nasdaq’s rebalancing in December, which could lead to another $20 billion of passive flows, if SpaceX has a 30% float by November 30th. Insider selling begins a year from the IPO, but amounts to 52% of shares outstanding to be unlocked. I wonder what kind of plans Musk’s financial engineers have come up with from that point, if SpaceX is still burning cash. Figure 5: Tiered Unlocking Schedule for Early SpaceX InvestorsSource: SpaceX, Reuters, and MH research. While the meme below is how active market watchers may view the SpaceX IPO, sometimest the best trade is no trade. Source: Twitter. NOTE: NOTHING IN THIS REPORT IS INVESTMENT ADVICE.