Key Points
SpaceX has filed to go public, reportedly targeting a valuation of more than $2 trillion. That would easily make it the largest initial public offering (IPO) in history. If it achieves exactly a $2 trillion valuation, that would make it the sixth-largest public company in the world, right behind Amazon (NASDAQ: AMZN).
Nobody knows what the appetite for the SpaceX IPO will be, and if the stock price rockets higher, investors won’t want to miss out on the potential for gains. While there may be some ways to purchase private shares through certain platforms, there’s only one surefire way for retail investors to invest in SpaceX before its IPO: Put money into Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).
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Alphabet is a longtime SpaceX investor
Alphabet has long been known for investing in companies that it believes in, and has made some successful investments over its history. However, none will likely outperform its SpaceX investment. Back in 2015, Alphabet invested $900 million for about a 7.5% stake in the business. If SpaceX goes public at a $2 trillion valuation, that investment will be worth $150 billion. That’s about a 166-fold profit, making it one of the best investments Alphabet could have made at that time.
With all this in mind, Alphabet will have a tough decision to make. Hold onto its investment or take profits and sell the shares to eager investors? I could see it going either way.
If it holds its shares, it shows it is invested in SpaceX’s future and aligned with its ambitious plans. If it sells, that may not be because management doesn’t believe in the company, but rather because it wants the money to spend on other items, such as artificial intelligence (AI) infrastructure.
Alphabet is deadlocked in a battle for AI supremacy with a host of opponents, and any cash it can dedicate to increasing its cloud computing footprint and attracting more clients will likely be money well spent. Nobody knows for sure what the returns on investment for AI infrastructure will be, but if Alphabet can capture a majority of AI clients by adding more hyperscale data centers, then it could make selling SpaceX stock worth it.
Regardless, if you want to invest in SpaceX ahead of the IPO, I think Alphabet is the best way to do it. You’ll get the upside of a potentially higher SpaceX stock pre-IPO price, as well as the upside of Alphabet’s AI prowess. That’s a win-win combination, and with Alphabet’s stock down around 15% from its all-time high, now could be a perfect time to buy.
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Keithen Drury has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
