SpaceX is preparing for an initial public offering (IPO) in June, a move that could make history as the largest IPO ever.

The company is reportedly targeting a valuation of $1.75 trillion, which would place it among the most valuable public companies.

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According to reports, as of market close on May 16, that valuation would make SpaceX the ninth-most-valuable public company, just ahead of Tesla.

Valuation and Market Reaction

The $1.75 trillion valuation has generated significant hype, especially among Elon Musk's supporters. However, history suggests that such high valuations may leave limited room for post-IPO growth.

Economist Jay Ritter of the University of Florida, known as "Mr. IPO," found that companies going public with over $1 billion in revenue tend to underperform the market by 2.1% over three years.

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Over five years, the underperformance averages 3% to 5% annually.

While past performance does not guarantee future results, investors should be cautious about confusing hype with long-term potential.

Impact on Index Funds

SpaceX's size and valuation may lead to fast-track inclusion in major indexes like the S&P 500, which typically require a year of trading.

This has sparked debate, as including a high-valuation company could weigh down index performance if it underperforms.

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Some analysts worry that such a large IPO could hurt passive investors who hold index funds. The potential underperformance of mega-cap IPOs is a key concern.

SpaceX's IPO is expected to be one of the most anticipated events in financial markets.

The company's dominance in space technology and its ambitious plans have drawn global attention.

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Investors will be watching closely to see if SpaceX can defy historical trends and deliver strong returns after listing.