June 12 (Reuters) - SpaceX is set to begin trading on Nasdaq on Friday after investors poured $75 billion into the world's biggest IPO ever, betting that Elon Musk's lofty space, communications and AI ambitions can justify a $1.77 trillion valuation.
The landmark listing cemented Musk's status as the first trillionaire ever and propelled SpaceX into the ranks of the world's most valuable companies - even though the firm posted a loss of nearly $5 billion last year and generated only a fraction of the revenue brought in by similarly valued tech giants.
The stock's performance will be a test for the so-called "Musk premium," which has been the force behind Tesla's $1 trillion-plus valuation. It will also be closely watched for signals on investor appetite ahead of forthcoming IPOs for AI heavyweights Anthropic and OpenAI.
With SpaceX widely viewed as a dress rehearsal for a new generation of mega-listings, market participants will also be watching how smoothly the debut unfolds. Exchanges and underwriters are under pressure to demonstrate they can handle the listing's extraordinary order volumes and avoid a repeat of the technical failures that marred Meta's 2012 debut.
Shares will likely not trade until the middle of the trading day, as the exchange collects buy and sell orders and underwriters delay trading until supply and demand is balanced. SpaceX priced the IPO at $135 apiece and sold 555.56 million shares.
The record IPO is a culmination of Musk's long-held ambitions in space and technology, and has stood out for rewriting Wall Street's IPO playbook and drawing legions of retail investors into the market.
WORLD'S LARGEST IPO
At $75 billion raised, the deal's proceeds more than doubled that of Saudi Aramco, the previous record-holder, in its 2019 listing. Its sale made SpaceX the first U.S. trillion-dollar debut and seventh-largest U.S. company by market capitalization.
Its valuation could rise further should underwriters exercise their right to sell additional shares, a decision typically made within 30 days after the offering.
Although SpaceX may have to wait for entry into the S&P 500, its expected fast-track inclusion in the Nasdaq 100 will soon make it a major holding for passive funds and ETFs that track the index, creating a fresh source of demand for its shares. It will take about a month before it gets added to that index under Nasdaq's new fast-entry rules, as opposed to a typical wait of as much as a year.
Some analysts expect SpaceX's debut to trigger a reshuffling of investor portfolios, creating selling pressure on other technology heavyweights as funds rotate into the stock.
The frenzied interest presents opportunity and peril, as some retail investors may chase the stock if they miss out on the IPO, said Jay Woods, chief market strategist at Freedom Capital Markets. SpaceX set aside 30% of the offering for retail investors to capitalize on Musk's popularity with individuals who have helped drive massive gains in Tesla shares.
"Historically, those investors tend to be the most vulnerable if momentum reverses," Woods said. "I think there will be better opportunities to enter this name down the road."
A $28.5 TRILLION MARKET OPPORTUNITY
For all the excitement surrounding the IPO, determining what SpaceX is actually worth remains a difficult valuation exercise.
SpaceX said its market opportunity spans $28.5 trillion, a figure it called the largest in human history. With its leading position in space - the firm says its operation is responsible for more than four-fifths of the mass launched into orbit over the past three years - and revenues from Starlink, some investors said it has a strong foundation upon which to build.
John Belton, portfolio manager at Gabelli Funds, said the best comparable to SpaceX is Musk's electric vehicle company Tesla, as each has an established business and "a moonshot opportunity on the other side."
"For Tesla, that's things like humanoid robotics and other future applications. For SpaceX, it's the AI business," he said.
The hurdles at its enormous valuation include efforts by rivals such as Jeff Bezos' Blue Origin to accelerate the commercialization of space and pursue government contracts in a bid to unlock new markets beyond Earth. Morningstar analysts earlier this month said it is more fairly valued around $780 billion, less than half of its opening market cap.
"This is not a name you're buying based on fundamentals. For me, the analogy is Amazon. This was a company that changed the way we live," said Nancy Tengler, CEO and CIO of Laffer Tengler Investments. "If the IPO comes out at $135 and the stock drops to $100, that's not ideal, but it wouldn't change our long-term view. We want to participate."
(Reporting by Manya Saini and Niket Nishant in Bengaluru and Echo Wang in New York; additional reporting by Sriparna Roy in Bengaluru; Editing by Colin Barr, Anil D'Silva, Dawn Kopecki and David Gaffen)
