As the year wears on, it becomes increasingly apparent that investors had ignored stock valuations until JustCo's IPO. JustCo, which fell on listing from its IPO price of 94 cents, continued to ease this week, ending at 76.5 cents. That still leaves the stock somewhat overvalued based on the price-to-earnings (PE) ratio. Instead of a PE ratio of 132 times at IPO, the PE ratio is 107 times as of May 29. Market watchers have articulated that growth companies should no longer be valued on earnings and that is the case with the biggest IPOs in the US.
SpaceX is likely to list on June 12. According to its prospectus, SpaceX has three business divisions: space, connectivity (Starlink) and AI (X and Grok). Of the three, Starlink generated the most revenues and was also the only positive division in terms of earnings. AI accounts for most of the capex.
Bank J. Safra Sarasin Research says US IPO performance since 2010 shows that the strongest gains typically occur over the first month after the IPO. “The median price return of the 50 largest US IPOs was 12.3% in the first month, but dropped to 10% over the first three months and turned negative over the first year after the IPO. It effectively shows that prices typically peaked in the first month after the IPO and dropped thereafter. Historical data suggests that larger IPOs typically see smaller gains out of the gates and a sharper decline over the following months,” Sarasin says.
However, Sarasin says tracking IPO performance over the past four years shows that they have not underperformed versus the S&P 500, but performance came with significantly higher levels of volatility.
See also: Jefferies expects S-REITs to enter DPU growth cycle
SpaceX is not the only IPO coming to market. The IPOs of OpenAI and Anthropic are planned for 4Q2026.
“The three upcoming IPOs are unlike anything before. The size of the companies coming to the market is unprecedented. Yet the fact that they are still loss-making and rely on exceptional growth assumptions leaves them no less vulnerable to setbacks than less mature companies,” Sarasin warns.
Closer home, a quick look at SATS’s balance sheet shows intangibles of $3,459.2 million compared to its shareholders equity of $2,936,7 million, translating into a negative net tangible asset (NTA) value for SATS. The intangibles are likely to be mainly the goodwill paid for Worldwide Freight Services which it acquired in 2023 at an enterprise value of the equivalent of $3,107 million. At the time, WFS had an NTA of negative $1,250 million. Should NTA matter? Not, it seems for investors of SATS. Indeed, despite SATS’ negative NTA, investors have focused on earnings growth, which is important. Since May 18, SATS’ share price has been up almost 20%. Its historic PE ratio is 19 times which makes it look undervalued compared with JustCo.
See also: STI breaks out as investors baulk at JustCo’s high PE ratio
Source: Maybank Securities
