Was it a coincidence that Elon Musk chose April Fool’s Day to file confidentially for what could be the largest initial public offering in history? The same week, the Nasdaq posted its steepest drop in nearly a year, and oil was clearing $110 a barrel.

Reena Aggarwal, the Robert E. McDonough Professor of Finance at Georgetown University McDonough and one of the world’s foremost authorities on IPOs, offered a warning that cut through all the superlatives. “You can have a great company, with great fundamentals and a lot of investor interest,” she said, “and an IPO can still flop if the markets have turned south, if there’s too much volatility.”

SpaceX is targeting a valuation of $1.75 trillion and a raise of $75 billion which would put it above every S&P 500 company except Nvidia, Apple, Alphabet, Microsoft, and Amazon. It recently absorbed Elon Musk’s AI company xAI, which was burning roughly $1 billion a month at the time of the merger. Twenty-one banks are lined up to manage the offering. And a June listing is still technically on the calendar, even as the Middle East burns and energy markets convulse.

The SpaceX IPO is, among many other things, a live examination of one of the most contentious problems in financial economics: whether the standard tools business schools teach for valuing companies actually work when the company being valued is like nothing that has existed before.

What Business Schools Teach and Where It Gets Hard

Every MBA student with a finance core learns the same basic toolkit. Discounted Cash Flow analysis values a company by projecting its future free cash flows and discounting them back to a present value. This is theoretically the a strongmethod, since a company’s worth should equal the cash it will generate. Comparable company analysis asks what similar public businesses are trading at, then applies those multiples. Precedent transactions look at what acquirers have paid for comparable companies in the past.

Chicago Booth’s Accelerated Valuation Program covers all of these: DCF, WACC, comparables, multiples, LBO structures. Stanford GSB’s teaching notes on valuing entrepreneurial companies walk through the same three pillars -balance sheet, income statement, and DCF – and are candid about where each method runs into trouble. The consistent message across top finance curricula is that valuation is less a science than a disciplined argument, where every assumption is a choice.

The problem with SpaceX is that every standard assumption immediately breaks down. What are the comparable companies? There are none. What are the future cash flows of a company whose bull case involves data centres in orbit and a self-sustaining city on Mars? Unknowable. The revenue multiple implied by the $1.75 trillion target – roughly 100 times Starlink’s projected 2026 revenue – is not a number generated by financial modelling. It is a number generated by narrative.

The History of Going Too Low

Evidence on IPO mispricing comes from decades of research, notably the work compiled by Jay Ritter, professor emeritus at University of Florida Warrington College of Business who is known as “Mr. IPO”, whose datasets spanning IPOs from 1980 to the present day have become the foundational reference point in the field. His finding is that the average first-day return on US IPOs has been around 18% since 1980, meaning companies routinely sell their shares to the market at prices substantially below where the market then immediately sets them.

This is money left on the table. Wealth transferred from the issuing company to the institutional investors who receive underpriced allocations, sell on day one, and pocket the gain. In the internet bubble years of 1999 and 2000, the average first-day return reached 65%, and the aggregate money left on the table across all IPOs of that period totalled some $63 billion. As Ritter and his co-author Tim Loughran documented in one of the most cited papers in IPO research, issuers often did not seem to object. Their personal wealth was surging alongside the underpricing, and the quid pro quos from underwriters were real enough that bargaining hard for a higher offer price felt like a secondary concern.

A striking example of underpricing in recent memory is not a dot-com obscurity but a company everyone knows. When Twitter priced its 2013 IPO at $26 a share, the stock opened at around $45 and closed at $44.90 on the first day. The company had left well over a billion dollars on the table in a single morning.

Google tried to solve this problem in the 2004 IPO using a Dutch auction mechanism – borrowed from the world of bond markets – in which investors submitted sealed bids stating how many shares they wanted and at what price. The clearing price was set at the lowest bid that still sold all available shares, and everyone paid that price. The goal was to let the market set the price rather than investment bankers. Google’s stock still rose 18% on day one, suggesting even the auction mechanism left some money behind. But it was a fraction of the windfalls being pocketed elsewhere on Wall Street, and the company raised its capital closer to what the market actually thought it was worth.

The History of Going Too High

If underpricing is a gift from companies to institutional investors, overpricing is a different kind of failure. It that leaves ordinary shareholders holding paper losses while founders and early backers have exited at fictional valuations.

The graveyard of overpriced IPOs is well-populated, but the class of 2019 stands apart in its instructiveness. Uber went public in May of that year targeting a valuation of $120 billion. Morgan Stanley and Goldman Sachs, the lead underwriters, had told the company that was its number. The market disagreed. The stock opened at $45 – the low end of the range – and fell 6.7% by close, producing the single largest first-day dollar loss of any US IPO since 1975: $655 million wiped from investor accounts in one session. No company had lost more money in the twelve months before its IPO than Uber. The valuation, as one banker later put it, had been built on an equity story rather than a financial model.

Lyft’s simultaneous debut followed the same script. WeWork never made it to the market at all. Its IPO prospectus, filed that August, revealed a $904 million net loss on $1.5 billion in revenue for the first half of the year, a corporate governance structure that would have tested the credulity of a medieval court, and a CEO who had trademarked the word “We” and sold it back to his own company. Bankers had been privately valuing WeWork at $47 billion. By October, the IPO had collapsed and the valuation had imploded toward single figures.

Will Gornall of the Sauder School of Business at University of British Columbia and Ilya Strebulaev, the David S. Lobel Professor of Private Equity and professor of finance at Stanford GSB have published research showing that unicorn overvaluation is not random or exceptional. All 135 unicorns in the sample were overvalued to some degree, so overvaluation was not just a pattern, it was universal ranging from 5% to 188%.

The financial terms of late-stage private funding rounds systematically inflate paper valuations, because the instruments used carry downside protections, liquidation preferences, and anti-dilution rights that make the headline number misleading. When those protections evaporate in a public market with no such guarantees, the valuation corrects – sometimes savagely.

Aggarwal’s own research, spanning decades of work on IPO allocation, price discovery, and market structure, has consistently shown that the gap between offer price and market reality is a problem of incentives. Underwriters serve two clients simultaneously: the company they are taking public and the institutional investors they need to keep happy over many future deals. These interests often point in opposite directions.

The SpaceX Problem

SpaceX has genuine, extraordinary assets. Starlink ended 2025 with 9.2 million subscribers and over $10 billion in revenue, a constellation of roughly 9,500 satellites, and long-term government contracts that represent some of the most defensible revenue in the private sector. The company completed 165 orbital flights in 2025 alone. These are not fictional numbers.

But the $1.75 trillion valuation is not really a valuation of those assets. It is a valuation of what Elon Musk might do next – data centres in orbit, Starship as the dominant heavy-lift vehicle for the next generation of space infrastructure, the xAI merger producing AI revenue streams that don’t yet exist. One analyst at SpaceNews put it plainly: the valuation cannot be justified by the company that currently exists. It is a bet on the company that might.

This is exactly where the MBA toolkit reaches its limit. DCF requires cash flow projections, and Starship’s commercial economics over a ten-year horizon are genuinely unknowable. Comparables require comparable companies, and there are none. What remains is the narrative multiple, the premium the market assigns not to what a company has built but to what it might become. And narrative multiples, as 2019 demonstrated, can collapse very quickly when the market is distracted, the macro environment turns hostile, and the story stops feeling inevitable.

Reena Aggarwal’s warning about market timing is not a technicality. Booth and Stanford teach their students that even the best-designed DCF is only as good as its discount rate, and that discount rates are themselves a function of market conditions – interest rates, risk appetite, geopolitical stability. Right now, all three are moving in the wrong direction. The SpaceX roadshow, if it launches in June as planned, will be pitching a $1.75 trillion story into one of the most volatile macroeconomic environments of the decade.

What Business Schools Are Really Teaching

The deepest lesson embedded in the best finance curricula is not about which model to use. It is about the conditions under which any model can be trusted. Stanford’s valuation notes for entrepreneurial companies are candid about this: different methods are appropriate for different stages of a company’s development, and for companies at the frontier of what has existed before, every method requires assumptions that are more judgment than calculation.

Chicago Booth’s research tradition, associated with scholars like Richard Thaler, whose work on behavioural finance and market anomalies earned him the Nobel Prize in 2017 has spent decades documenting the ways that human psychology distorts even apparently rational financial markets. The Palm/3Com case features prominently in his Nobel lecture and in the co-authored paper with Owen Lamont, “Can the Market Add and Subtract?“. It is a favourite in Booth’s curriculum, showed that the market could value the subsidiary of a company at more than the parent – an arithmetical impossibility that persisted for months. If the market cannot add and subtract, the question of what it can reliably do with a $1.75 trillion valuation is genuinely open.

Perhaps the most important thing business schools teach about IPO valuation is that the three parties most closely involved – the company, the underwriters, and the institutional investors – all have reasons to be less than fully honest about what a company is worth. The company wants the highest possible price; the underwriters want happy clients on both sides; the institutions want underpriced shares they can flip. In that structural tension, the valuation that emerges is rarely purely a function of the underlying business. It is a negotiated outcome between competing interests operating under radical uncertainty.

SpaceX may well be worth $1.75 trillion. It may be worth more. The problem is not the company, it is that nobody, including the 21 banks pitching for the mandate, has a reliable method of knowing. Which is, as Georgetown’s Aggarwal would likely confirm, precisely what makes this the most interesting IPO in history.

About the author

Matt Symonds is Chief Editor of BlueSky Thinking, and host of BlueSky Media Connect, bringing together b-schools and universities to meet editors from FT, BBC, Bloomberg, WSJ, The Economist, NYTimes and other global / regional media.

He is the S of QS, co-founding QS Quacquarelli Symonds, publishers of the QS World University Rankings. Matt I also co-Founder and Director of Fortuna Admissions, a coaching dream team of former business school and university admissions professionals from top-tier institutions, including Harvard, Stanford, Wharton, INSEAD, LBS, Chicago Booth, Columbia, Northwestern Kellogg, Berkeley Haas.

Matt co-host the CentreCourt MBA & Masters Festivals with John A. Byrne and Poets & Quants. Author of the international bestseller, “Getting the MBA Admissions Edge” sponsored by Goldman Sachs, McKinsey, Bain, BCG, he writes about Higher Education and management for BBC, Times of India and formerly Forbes, The Economist and Bloomberg.

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