Valuation Discipline in a Market Driven by Hype

For what comes next.

Overview

Hollywood spends millions perfecting trailers, two minutes of highlight reels designed to sell the experience before you know what you’re actually buying.

Markets aren’t that different.

In the short term, markets run on narrative, momentum and emotion. In the long term, outcomes are driven by fundamentals. As Benjamin Graham put it: the market is a voting machine in the short term and a weighing machine over time.

Right now, AI and Space are producing some of the most compelling “trailers” investors have seen in years. The story is powerful. The excitement is real. Capital is flowing.

But eventually, the fundamentals have to deliver.

SpaceX: Paying for the Hype

The upcoming SpaceX Initial Public Offering (IPO) sits at the centre of both trends.

The company is seeking to raise US$75 billion at an implied valuation of approximately US$1.75 trillion – making it the largest IPO in history and placing it among the world’s most valuable companies. Reported 2025 revenue was US$18.7 billion, with Starlink driving the majority of growth and reaching 10.3 million subscribers by Q1 2026.

Short-term demand is likely to be strong. Retail allocations of up to 30% (around US$22.5 billion) and lower entry minimums are designed to maximise participation.

But the key question is simple: what are you paying for?

For perspective, Apple listed in 1980 at under US$2 billion, around 15x revenue. That reflected genuine early-stage risk.

SpaceX is coming to market at around 100x revenue and a US$1.75 trillion valuation. That’s not early-stage investing. It’s paying a premium price after years of value creation – effectively providing liquidity to early investors.

Morningstar has already flagged the company as “significantly overvalued”, noting that much of its valuation depends on technologies that remain untested at scale. Delivering the level of profitability required to justify this valuation is a significant challenge.

Valuation always matters. Overpaying increases the risk that long-term returns disappoint – regardless of the quality of the asset.

ETFs: Scale Without Sensitivity

At the same time, market structure is adding to the dynamic.

There are now more Exchange-Traded Funds (ETFs) than listed companies in the US – in 2025 alone.

Many of these products are passive and price insensitive. They allocate capital based on market size, not valuation – and they move both up and down accordingly.

The rise of leveraged ETFs (2x–3x) has further amplified short-term behaviour and volatility.

This environment can create sharp dislocations. When overvalued assets disappoint, price falls can be rapid – as seen recently in parts of the Australian equities market.

In simple terms: passive flows follow the crowd, not the fundamentals.

Property: When Reality Sets In

Closer to home, the Australian residential property market is a clear example of sentiment shifting.

Recent policy changes, combined with higher interest rates, are starting to impact behaviour:

National auction clearance rates fell to 52% in May 2026 (with Sydney falling to 49%)
Three consecutive RBA rate hikes have added approximately $375/month to a $600,000 mortgage
Price declines are most pronounced in higher-end suburbs
Sentiment has turned negative

For years, the dominant narrative was simple: property prices always rise.

The current environment tells a different story – one where borrowing costs increase, credit tightens, and prices can fall, particularly from peak levels.

The impact is now flowing through to bank valuations, with earnings forecasts being downgraded and pressure building across the sector.

The Takeaway

Across all asset classes, the principle is the same:

What are you paying and what are you realistically expecting in return?

A US$1.75 trillion IPO at around 100x revenue
Bank stocks at peak-cycle valuations
Property purchased at market highs

Each carries risk if pricing disconnects from fundamentals.

Apple at 15x revenue rewarded investors who took early-stage risk. SpaceX at 100x revenue represents a very different starting point.

At Perks Private Wealth, valuation is the foundation of every investment decision – across equities, property, credit and alternatives.

The trailer will always be compelling. Our role is to ensure you’re not overpaying for the ticket. We cut through the noise – focusing on valuation and long-term outcomes, not short-term excitement. Get in touch to review your strategy and ensure it’s built for what comes next.