SpaceX Stock Down 25%: Inside The Debt And Equity Risks

SpaceX Is A Conglomerate Of Unrelated Businesses

SpaceX consists of three largely unrelated businesses – one of which is profitable, but declining while the other two are burning through huge amounts of cash and likely to continue to do so.

SpaceX’s Connectivity unit – which operates the Starlink communications business – generated $11.387 billion of revenue (61% of the total) and $4.423 billion of operating income in 2025, according to the company’s IPO prospectus.

While the business had 10.3 million subscribers in Q1 2026, its average revenue per user fell by a third from $99/month in 2023 to $66/month in Q1 2026 as it pushed into price-sensitive markets. Facing competition from Amazon Leo, such price competition could worsen.

The company’s two cash incinerators are as follows:

• Space (launch + Starship) launches reusable rockets. In 2025, the business generated $4.1 billion in revenue, a $657 million operating loss, and spent $3 billion on Starship R&D in 2025, per the company prospectus. While SpaceX carries over 80% of global mass to orbit, the segment reinvests its cash into Starship.
• AI (xAI/Grok/X) – the AI and social network unit – produced a $6.355 billion operating loss in 2025 – roughly twice its revenue – while spending $7.7 billion on capex in the first quarter of 2026 alone. Burning through an annualized $30 billion, the AI unit turned a profitable company into a heavy loss-maker.

Why SpaceX Stock Fell 25%

The root cause of SpaceX’s stock price decline was the gap between the high valuation of its shares at the IPO and the low profit potential of the company’s business units. In addition, a few post-IPO financial moves further spooked investors.

The IPO price was managed to achieve a first-day pop. Only about 5% of SpaceX shares were sold to the public and shares were valued at an exorbitant 94 times sales. Record retail demand – 30% of total which was three to six times the usual allocation – and buying by index funds helped propel the shares, according to the New York Times.

One valuation expert said SpaceX was embarrassingly overvalued. The $28.5 trillion total addressable market cited in the IPO prospectus prompted NYU Stern valuation professor Aswath Damodaran to say “the prospectus was written by Grok,” reported CNBC. The IPO valuation was 27% too high based on his discounted cash flow analysis and the TAM estimate was a “hallucination” he “would be embarrassed to even put out,” he added.

Given SpaceX’s money-burning business model, it is no surprise that S&P projects the company will generate negative free cash flow through 2029. That’s because SpaceX reported a 2025 net loss of $4.937 billion. It gets worse – in the first quarter of 2026, its net loss was $4.276 billion the company spent $7.7 billion on AI capital expenditures.

SpaceX’s equity allocation is a significant risk for retail investors. Elon Musk holds the vast majority of the voting shares. Also important – a whopping 44% of the shares could be dumped by insiders in September – which may pressure the stock price.

On top of that, two significant events took place after the IPO. These included:

The latter offering – which prompted traders to price the bonds at junk levels – has not gone over well. “The biggest, most sophisticated investors in the world see a harder road to success than Musk touts and demand to be compensated accordingly,” noted Bloomberg. “Traders told Bloomberg they couldn’t recall another deal where prices sank that quickly,” added the New York Times.

The Bull And Bear Cases For SpaceX

Despite all this, the bull case prevails on Wall Street. That’s because 27 analysts set an average 12-month price target of $245.96 – suggesting 61.6% upside.

The bull case is a torrent of words at odds with cash flow reality. SpaceX is a vertically integrated platform — dominant launch, the largest satellite-internet network, and a call option on AI infrastructure and Mars — with Starlink’s cash flywheel funding it all.

Raymond James analyst Brian Gesuale wrote “just as railroads, electric grids, and the Internet reshaped prior economic eras,” SpaceX is “building the foundational platform for the next generation of industrial capacity.”

The pessimists would avoid SpaceX shares. These include GMO’s Jeremy Grantham who called its offering possibly “the craziest IPO in human history” and said he’d only be interested “at 10 cents on the dollar.” Paul Krugman likened the company to a “Ponzi scheme.”

The one reasonable hope for SpaceX bulls is if the company reports consistently better than expected results — such as a clear and compelling path to profitability in its money-incinerating Launch and AI units.

Otherwise, those who bought into Musk’s reality distortion field may lose money on SpaceX stock.