Nearly 2M-Strong Union Warns Of ‘Overvalued, High-Risk Bet’ To Markets Regulator
The American Federation of Teachers urged the SEC to apply “extraordinary scrutiny” to the IPO.
- SpaceX is targeting a mid-2026 IPO that could value the company between $1.75 trillion and $2 trillion.
- The union criticized SpaceX’s financial disclosures as being “shrouded in ambiguity.”
- A major focus of the criticism involved Nasdaq and index-provider rule changes that could allow SpaceX to enter major indexes within 15 days of listing.
SpaceX’s highly anticipated IPO is drawing mounting criticism after a major U.S. labor union warned regulators that CEO Elon Musk’s mega listing “defies financial logic” and could expose retail investors to outsized risks.
Union Warns SEC Over SpaceX IPO Risks
In a letter sent Wednesday to SEC Chair Paul Atkins, American Federation of Teachers (AFT) president Randi Weingarten called on the regulator to subject SpaceX’s IPO to “extraordinary scrutiny,” warning that millions of retail investors and retirement accounts could be pulled into an “overvalued, high-risk bet.”
SpaceX is targeting a mid-2026 IPO that could value the company between $1.75 trillion and $2 trillion, potentially making it one of the largest public listings in market history.
The American Federation of Teachers, which represents 1.8 million teachers, nurses, healthcare workers, and public employees, argued that the IPO raises concerns around valuation, accounting practices, governance, and investor protections. “This is not just another IPO — it’s the largest in U.S. history, and it’s being rushed to market with a valuation that ‘defies financial logic,’” Weingarten said in a statement. She also warned that retail investors are being steered toward a company whose financial disclosures are “shrouded in ambiguity.”
Union Pushes SEC To Block Fast-Track IPO
A major focus of the union’s criticism was recent rule changes at Nasdaq and other index providers that could accelerate SpaceX’s inclusion in major indexes shortly after its IPO. Weingarten urged the SEC to work with Nasdaq and S&P to reverse the “fast entry” rule that allows mega IPOs to enter indexes 15 days after listing, rather than waiting months.
According to the union, the rule changes could force Americans invested in passive index funds to buy SpaceX shares before investors fully understand the risks of valuation and business model.
The union also said that SpaceX’s reported valuation lacks credible justification, given the company’s dependence on “unproven technologies, speculative markets and untested business models.” Weingarten further raised concerns about alleged aggressive accounting practices and the independence of SpaceX’s board, claiming that three of the company’s four known pre-IPO board members maintain close personal or financial ties to Musk.
Passive Buying Frenzy Could Fuel SpaceX IPO
The warning comes as investors increasingly weigh whether the SpaceX IPO could trigger one of the fastest passive-buying frenzies in market history. Earlier this week, Alexandra Merz, CEO of L&F Investor Services, said that recent Nasdaq rule changes could potentially trigger billions of dollars in passive buying from index funds.
Merz estimated that over $600 billion from Nasdaq-100 tracking funds alone could generate $8 billion to $12 billion of demand for SpaceX shares shortly after the IPO. Additional flows from FTSE Russell and CRSP indexes tracked by Vanguard funds could potentially add tens of billions more.
The Tesla influencer has also argued that growing ties between SpaceX and Tesla could amplify investor flows between the two companies, saying that “the Tesla-SpaceX lockstep would let holders of both benefit from the flows.” She also outlined a scenario in which SpaceX and Tesla could pursue a merger of equals after the IPO, creating a tighter relationship between the two stocks through merger arbitrage and shared investor flows.
SpaceXAI Push Raises New IPO Concerns
Meanwhile, Musk is expanding SpaceX’s AI ambitions ahead of the IPO as the company pushes beyond rockets and satellites into AI infrastructure and orbital data centers.
Late Wednesday, Musk said that xAI would no longer operate as a separate company and would instead integrate into SpaceX under the “SpaceXAI” banner. The move followed a deal involving Anthropic and SpaceX’s Colossus 1 AI supercomputer cluster in Memphis, which contains over 220,000 Nvidia GPUs. The Anthropic deal comes just weeks after xAI struck a similar capacity-sharing deal with AI coding startup Cursor.
Questions are also emerging about xAI’s data center operations ahead of the IPO. According to SpaceX’s draft IPO prospectus, xAI reportedly claimed it brought its first two chip clusters online at one-quarter of the industry’s normal costs. However, the filings and operational details also pointed to trade-offs from temporary power and cooling infrastructure, reliability challenges, and operational disruptions at xAI’s Memphis facilities.
The disclosures also showed that xAI relied heavily on temporary gas turbines, Tesla Megapack batteries, and mobile cooling systems to accelerate deployment timelines.
How Do Retail Traders Feel About SpaceX?
On Stocktwits, retail sentiment for SpaceX was ‘neutral’ amid ‘normal’ message volume.
One user said, “I won’t buy this once it goes live; this IPO feels like gambling to me.”
Meanwhile, another user said, “Anyone that thinks SpaceX is overvalued at $2T does not know what he or she is talking about.”
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