SpaceX Stock Plummets Below IPO Price as Wall Street Valuations Face Credibility Crisis

SpaceX shares have tumbled below their $135 initial public offering price, shedding nearly 60% of their value from peak levels reached days after the June debut. The decline represents a sharp reversal from Wall Street's initial enthusiasm, with prominent investor Jeremy Grantham characterizing the offering as fundamentally overvalued.

The Timing Disconnect

The stock's collapse came with jarring timing. Days after more than a dozen major banks released price targets that were overwhelmingly optimistic, SpaceX shares dropped below their offering price and continued declining toward $125. The Nasdaq debut in June had been the largest in U.S. history, with shares initially reaching near $211 within three days of trading.

Wall Street's analysis arrived in early July, roughly 25 days after trading commenced—standard procedure for post-IPO research coverage. The underwriting syndicate, comprising twenty-three banks including Goldman Sachs, Morgan Stanley, J.P. Morgan, Citigroup, and Bank of America, had collectively earned approximately $500 million in fees representing 0.66% of the $75 billion raised. Five banks declined to issue price targets or ratings, while one provided only an "outperform" recommendation without a specific price projection.

Analyst Predictions Under Scrutiny

The seventeen banks that did forecast specific price targets for the 12-to-18-month outlook period showed dramatic divergence. Raymond James projected the most bullish call at $800, implying a 400% increase from the $160 closing price on July 6. Conversely, Stifel issued the most conservative forecast at $190, suggesting just a 19% gain. This wide disparity has now become a source of credibility questions as the stock trades significantly below even the lowest projections.

The Grantham Critique

Jeremy Grantham, founder of GMO and known for his cautious market outlook, offered scathing commentary during a recent Morningstar interview. He characterized the valuation as historically excessive and predicted future analysts will point to the prospectus—featuring multi-page rocket ship imagery and aspirational business plans including space tourism and asteroid mining—as an example of speculative excess.

Grantham's primary concern centered on SpaceX's artificial intelligence divisions, including xAI and X (formerly Twitter), which he described as "third-rate" compared to industry leaders like Anthropic and OpenAI. He stated he is "90%" confident in a crash scenario for SpaceX shares, though he acknowledged uncertainty about artificial intelligence's ultimate potential. Despite predicting a stock collapse, Grantham expressed greater fear of a future where AI becomes powerful enough to create severe technological risks.