After SpaceX’s IPO, it issued yet another massive bond offering—“pissed off” the market and sparked a brutal sell-off.

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Author: Bao Yilong

Following its record-breaking IPO, SpaceX's massive $25 billion bond issuance faced a violent sell-off in the secondary market. The aggressive financing pace of this long-unprofitable rocket and artificial intelligence company quickly backfired on investor confidence, causing its bond spreads to widen sharply, approaching speculative-grade (i.e., "junk") levels.

As of Friday, within just 48 hours of pricing, SpaceX's corporate bonds went from "red-hot demand" on paper to a full-blown collapse.

The selling pressure on SpaceX bonds of all maturities has led to cumulative book losses of approximately $400 million relative to U.S. Treasuries. The spread tightening gains achieved by underwriters during the subscription phase were completely erased by the decline in long-end bonds.

According to MarketAxess data, SpaceX's 10-year bond yield rose to nearly 6%, and the spread over U.S. Treasuries widened to more than 1.6 percentage points. The spreads on its long-end bonds maturing in 2046 and 2056 surged to 1.93 and 2.01 percentage points, respectively.

According to Ice Data Services, the current market average spread for BB-rated "junk bonds" is 1.67 percentage points. This means that SpaceX, which has a Baa1/BBB investment-grade rating, is actually trading at a price significantly worse than some junk-rated issuers.

The magnitude and speed of the crash have stunned fixed-income market traders. Market participants noted that there is almost no precedent for such a rapid spread widening in recent mega-bond issuances.

"Perfect Storm" Devastates Secondary Market

The initial book data for SpaceX's bond offering once masked the underlying risks.

According to Bloomberg, the deal initially received nearly $90 billion in subscription orders, with oversubscription of nearly 4 times, and the issuance size was consequently increased from $20 billion to $25 billion.

However, traders revealed that this frenzy was mainly driven by fast money seeking short-term arbitrage, rather than traditional buy-and-hold investors. When these funds tried to quickly cash out gains in the secondary market, selling pressure surged.

Tony Trzcinka, portfolio manager at Impax Asset Management, said the market had expected SpaceX's spreads to widen, but the current extent is a "perfect storm."

He pointed out that this stems from the company's significant market value contraction since the IPO, technical selling pressure from the enlarged issuance size, and investors still struggling to price its unique risk profile.

For comparison, Nvidia, which recently completed a $25 billion bond issuance, saw its long-end bond spreads widen by only 11 to 12 basis points, while Alphabet's long-end bond spreads even narrowed.

Additionally, SpaceX's credit default swaps (CDS) also widened significantly after the trading opened, further confirming the market's defensive stance on its credit profile.

Cash Flow and Governance Risks Trigger Direct Concerns

Equity and bond investors have fundamental differences in their assessment logic for SpaceX.

The company raised $86 billion through its IPO earlier this month, with its valuation peaking at nearly $3 trillion before retreating to $2 trillion. This valuation is largely based on expectations of a surge in future AI revenue.

However, for creditors, the core fact is that SpaceX achieved revenue of $18.7 billion in 2025 while suffering a net loss of $4.9 billion. PGIM portfolio manager Michael Campion said:

"In the investment-grade bond market, we focus on whether a company can repay its debt. We are accustomed to lending based on actual cash flow, not expectations."

Allianz Chief Investment Officer Ludovic Subran also stated bluntly:

"Bond investors are different from stock investors. Stock investors can go to Mars with you, but bond investors will only ask, 'Where is my coupon?'"

Furthermore, the extreme reliance on Musk's personal leadership has become a core concern for rating agencies and investors. Fitch Ratings considers this a "key rating constraint."

James Dow, professor at London Business School, pointed out that SpaceX is extremely dependent on Musk and lacks a succession plan, with exceptionally weak corporate governance, which significantly reduces the attractiveness of its long-term debt.

Tech Giants' Bond Issuance Wave Approaches "Bubble" Territory

The cold reception SpaceX encountered is not an isolated incident, but rather exposes the systemic risks of debt expansion among current tech giants.

As tech companies race to raise massive funds to finance AI projects, investors are facing a large-scale bond supply shock.

According to Morgan Stanley data, AI-related debt issuance this year has reached $236 billion, a year-over-year increase of 357%, and is expected to double to $570 billion by the end of the year.

The borrowing frenzy is rapidly pushing up the industry's leverage ratio. Data shows that the total leverage ratio of mega-cap tech companies has doubled in just over two quarters, surging from 0.9x to 1.8x, surpassing the total leverage ratio of the entire energy industry.

This massive supply is overwhelming market structure. Bloomberg calculations show that as of Wednesday, U.S. investment-grade bond supply in June has reached $180 billion, a record high.

Supply glut has begun to weigh on broader credit spreads. Morgan Stanley notes that spreads for mega-issuers are widening across the board, with bond performance from Oracle and Meta confirming this trend.

Mark Dowding, Chief Investment Officer of Fixed Income at RBC BlueBay Asset Management, wrote in a report that bondholders have apparently concluded that with this loss-making company financing its path to future profitability, there may be substantial additional debt issuance in the future.

Analysts believe that if this pace of debt expansion continues, credit spreads will eventually blow out further, thereby materially constraining the capital expenditure cycle of tech companies.