Everyone is talking about SpaceX going public. Why I think you should avoid it and what to buy instead.

Everyone’s talking about SpaceX’s initial public offering (IPO), which makes a lot of sense given that it’s led by Elon Musk and features interesting new technology.

But good investing is more than flashy CEOs and new frontiers. Here’s why I think investors should avoid the SpaceX IPO and what they might want to buy instead.

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According to Bloomberg’s original IPO report, SpaceX is eyeing a valuation of $1.75 trillion when it goes public, and the IPO aims to raise $75 billion. This is a considerable valuation and would make the company the eighth most valuable company in the world, just behind Broadcom (NASDAQ:AVGO)and ahead of Musk’s other company, tesla (NASDAQ:TSLA). The filing with the Securities and Exchange Commission was done confidentially, so investors don’t have access to the financial data, but SpaceX would have to make a lot of money for the valuation to make sense.

SpaceX is more than theoretical space travel. It already puts satellites and rockets in space and also brings people, and Musk has said he is looking to take people to Mars. Its clients are the United States Department of Defense and NASA, and it is the largest private space company in the United States.

SpaceX merged with Musk’s artificial intelligence (AI) company xAI in February, and the company’s Starlink satellite broadband product provides internet services to millions of customers around the world. According to Bloomberg, the rocket launcher and Starlink businesses will generate around $20 billion in revenue in 2026, and xAI will earn around $1 billion. According to Reuters, last year it made between $15 billion and $16 billion in revenue, with $8 billion in profits.

Even using the higher figure of $20 billion, a market capitalization of $1.75 trillion implies a price-to-sales ratio of 87, which is astronomical, to say the least. There’s already plenty of growth in that valuation. These types of hyped IPOs often rise at first and then fall, leaving retail investors holding the bag.

If you are interested in investing in space exploration, a safer way to do so is to invest in a space-themed exchange-traded fund (ETF), such as the Ark Space and defense innovation ETFs (NYSEMKT:ARKX)he Invesco Aerospace and Defense ETFs (NYSEMKT:PPA)and the State Street SPDR S&P Aerospace and Defense ETF (NYSEMKT:XAR). All of these ETFs have holdings in companies related to space exploration and they are all outperforming the S&P 500.

You can buy the Ark ETF for just $33, and all of these ETFs can be easily traded on open markets. They give you exposure to many different space and defense stocks, but risk is minimized thanks to diversification and more established holdings. For example, the top holdings of the Invesco ETF are boeing and general electricitybut also owns shares of rocket laboratory and Planet Laboratories. If you have a higher risk appetite, Ark ETF’s top holdings include Rocket Lab and archer aviation.

It’s also possible that once SpaceX goes public, some of these ETFs could take a position, giving you access to the stock and reducing your risk.

Before purchasing shares of Ark ETF Trust – Ark Space & Defense Innovation ETF, consider the following:

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool positions and recommends Boeing, Broadcom, GE Aerospace, Planet Labs, Rocket Lab, and Tesla. The Motley Fool has a disclosure policy.

Everyone is talking about SpaceX going public. Why I think you should avoid it and what to buy instead. was originally published by The Motley Fool