Since our May 29 coverage of SpaceX cutting its IPO target from $2 trillion to $1.8 trillion, the deal has moved fast — and the skeptics have gotten louder.

The Deal, As It Stands

SpaceX is set to list on the Nasdaq on June 12, according to CNBC. The company is targeting a $1.75 trillion valuation at $135 per share, with Reuters reporting that figure this week. The float is small — Morningstar analyst Nicolas Owens told clients SpaceX is offering roughly 3% of shares to the public.

A tiny float with massive institutional demand creates artificial price support on day one. The IPO mechanics are deliberately engineered this way.

Morningstar's Assessment

Morningstar dropped a note Monday that challenges the IPO price significantly.

Analyst Nicolas Owens put SpaceX's fair value at $780 billion — roughly 55% below its $1.75 trillion IPO target. His discounted cash flow model values the core launch and Starlink businesses at $611 billion in enterprise value, with another $170 billion tacked on for probability-weighted AI scenarios.

Even being generous about the AI upside, Morningstar values the company at roughly half the IPO price.

The numbers in SpaceX's own S-1 support this caution. The company posted a net loss of $4.28 billion in its most recent quarter, after losing $4.94 billion in all of 2025. The only profitable segment is Starlink connectivity. The space launch division lost $619 million on an operating basis. The AI unit — xAI, absorbed in a related-party deal that Owens flagged as NOT conducted at arm's length — lost $2.5 billion.

SpaceX wrote in its S-1 that it has "a history of net losses and may not achieve profitability in the future."

The xAI Problem

Morningstar's treatment of xAI reveals significant uncertainty. Owens modeled three scenarios for SpaceX's plan to put data centers in orbit. The "moonshot" case — valued at $1.3 trillion — gets a 7% probability. The "no go" scenario, which would destroy $81 billion in value, gets a 43% probability. The median outcome is somewhere in between and deeply uncertain.

Owens described xAI's economic moat as "indeterminate" and called it a "material threat of value destruction." Neither Morningstar nor the market has confidence in the unit's value creation potential.

The governance structure compounds the risk. Musk retains 85% voting control through a dual-class share structure. Public shareholders are buying economic exposure, not influence. The xAI merger happened between related parties without arm's-length negotiation. Owens flagged this as a significant concern for investor protection.

Winners and Losers the IPO Creates

While Morningstar warns retail investors away from the IPO price, investment bank Oppenheimer is mapping out the competitive winners and losers.

Oppenheimer analyst Timothy Horan downgraded AT&T to perform from buy on Wednesday, citing Starlink's looming threat to traditional broadband. Horan said AT&T is "most at risk" among the telecom giants because Verizon and T-Mobile have less broadband exposure. AT&T shares are already down 12% over the last three months.

The FCC isn't helping AT&T's case. In April, the commission updated its satellite spectrum-sharing rules in a move the agency said could boost space-based broadband access "seven-fold." FCC Commissioner Olivia Trusty explicitly named SpaceX's Starlink as a beneficiary. Regulatory wind is at Starlink's back and in AT&T's face.

Horan predicted: "In three years, new fiber builds will halt, hitting the entire foodchain." Cable faces significant structural headwinds under this scenario.

On the flip side, Oppenheimer raised its price target on Iridium Communications to $60 from $48, implying 21% upside. Iridium operates its own Low Earth Orbit satellite network and uses SpaceX to launch its satellites. Horan argues the entire "space food chain" expands as SpaceX scales — and Iridium rides that current. Iridium shares are up 185% year-to-date already.

What the Market Is Missing

Financial media is focused on the headline story — biggest IPO ever, Musk, AI in space. The financial details tell a different story.

Starlink generated $3.26 billion in revenue last quarter — accounting for 69% of SpaceX's total revenue — and it's the ONLY profitable segment. Strip Starlink out and you have a money-losing rocket company subsidizing a money-losing AI unit. That's the actual business you're buying at $1.75 trillion.

The float is also engineered for short-term momentum. Three percent of shares, every major investment bank in the syndicate, and a pathway to Nasdaq 100 inclusion just 15 trading days after listing create the conditions for opening-day gains. Morningstar acknowledged the stock will "likely survive separation and may even ascend, at least for a time" — not because it's fairly valued, but because the mechanics favor it short-term.

This is a trap for retail investors who chase the opening-day buzz.

The Reality

Starlink is a genuine business with real revenue, real growth (50% revenue growth to $11.3 billion in 2025), and a legitimate competitive moat. SpaceX launched 83% of the mass sent to orbit from Earth in 2025 and cut launch costs by more than 95%. These are real achievements.

But the IPO valuation bundles Starlink together with a money-losing AI moonshot and Elon Musk's governance structure — at a price Morningstar says is roughly double what the fundamentals support.

The company itself warned investors in its S-1 that it may never be profitable. That warning deserves to be taken seriously.