Could SpaceX and OpenAI IPOs trigger a 40% market crash — and what does it mean for Canadian investors holding U.S. equity?

“SpaceX’s massively successful IPO, along with the expected IPOs of artificial-intelligence giants OpenAI and Anthropic, make a severe bear market much more likely,” Hulbert noted. “And by severe, I mean a drop of almost 40%.”

The stakes are real for Canadian investors. The Ontario Teachers’ Pension Plan (OTPP) invested around US$220M (~C$300M) in SpaceX in 2019 — a position now estimated to be worth as much as US$11.6B (~C$16.3B). Meanwhile, Canada Pension Plan (CPP) Investments — which manages C$793.3B on behalf of 22 million Canadians — has also been examining how mega-IPOs affect its broader portfolio.

How huge IPOs can drain the stock market

The theory behind Hulbert’s warning is as follows: when a massive company goes public, large investors have to sell their existing holdings to raise the cash needed to buy the new shares — effectively pulling money out of the broader stock market and redirecting it into newly public companies.

“When a multi-billion-dollar company hits the public market, it doesn’t magically create new investing cash out of thin air,” said stock market expert Dan Ye, who teaches an “Investing in the Age of AI” course at Johns Hopkins University. “The money to buy those fresh shares has to come from somewhere.”

In practice, that means pension funds, hedge funds and everyday investors fund their IPO purchases by selling off their existing holdings. This includes blue-chip stocks, broad market ETFs and index funds, as well as those that track major Canadian benchmarks like the S&P/TSX Composite Index.

“If we see a rapid-fire succession of these massive offerings, we are easily looking at an aggregate capital raise north of US$200B,” Ye said. “That is a massive, structural drain on everyday market liquidity.”

A 2021 NBER working paper by Gabaix (Harvard) and Ralph Koijen (University of Chicago) — known as the "inelastic markets hypothesis" — estimated that every US$1 net flow into or out of the U.S. stock market moves total market value by roughly US$5. Financial commentators such as Hulbert have applied that multiplier to the combined fundraising of SpaceX, OpenAI and Anthropic — together estimated at around US$200B (~C$282B) — to suggest that a US$1T (~C$1.41T) decline in total market value is possible. However, this specific application is commentary extrapolating from the research, not a conclusion the paper itself makes.

The SpaceX IPO alone was already historic: the company raised US$75B (~C$106B) on the Nasdaq (SPCX) on June 12, 2026 — the largest IPO in history — at a price of US$135 a share, valuing the company at approximately US$1.77T (~C$2.5T).

OpenAI and Anthropic have since confidentially filed draft IPO registration statements with the SEC in 2026 — a preparatory step in advance of an actual public offering. Anthropic's latest private funding round valued the company at US$965B (~C$1.36T), while OpenAI's last private valuation stands at US$852B (~C$1.20T). Both are said to be targeting a public listing valuation near US$1T.

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What this means for Canadian investors specifically

While the Hulbert/Gabaix thesis focuses on U.S. market dynamics, Canadian investors aren’t watching from a safe distance.

For context, the Toronto Stock Exchange (TSX) had a total listed market capitalization of approximately C$6.95 trillion in June 2026. While the TSX's total size still exceeds the combined valuations of SpaceX, OpenAI and Anthropic, Canada's market is nonetheless closely linked to U.S. equities. In fact, many TSX-listed companies are cross-listed or correlated with U.S. sector performance, so a significant U.S. market move, like the one these mega-IPOs could trigger, tends to ripple into Canadian markets too.

Canadian institutional investors are already wrestling with this dynamic. According to Benefits Canada, the SpaceX IPO is prompting Canadian pension fund managers to reconsider whether active management might serve them better than passive index-based investing — a question that strikes at the heart of how billions in retirement savings are managed.

Stack Capital Group Inc., a TSX-listed investment company, purchased US$8M (~C$11.28M) in SpaceX shares in 2021 and 2025. At the IPO valuation, that position was worth more than US$100M (~C$136M) — yet the company said it had no plans to sell. Stack also holds a position in OpenAI.

The situation is more nuanced for individual Canadians. Online brokerage Wealthsimple opened access to select US and Canadian IPOs for retail clients around the time of the SpaceX listing, allowing eligible clients to request shares at offering price with no minimum order. However, US-only IPOs like SpaceX's remained restricted to accredited investors.

SpaceX itself had initially targeted up to 30% of its IPO shares for retail investors — roughly triple the typical 5-10% allocation — though the final allocation came in at around 20% due to strong institutional demand.

That being said, SpaceX shares aren't listed on the TSX. Canadians who want to hold the stock directly need to access the Nasdaq through a Canadian brokerage with U.S. market access, such as Questrade, Wealthsimple, or CIBC Investor's Edge. If held inside a registered account like a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA), SpaceX shares may qualify as eligible foreign investments — though currency conversion costs and U.S. withholding taxes may apply.

SpaceX, OpenAI and Anthropic may not be big enough to crash the market

Not every market expert agrees with the bear-market scenario.

“While SpaceX’s IPO was the largest in history — raising a total of US$85.7B (C$120.8B) — some people overstate its impact, citing that the IPO price valued the firm at US$1.77T,” said Robert R. Johnson, founder and CEO at New York City-based Economic Index Associates. He noted the actual cash raised is “a small fraction of the total market capitalization of SpaceX.”

Johnson pointed out that U.S. stock market capitalization stood at about US$79.4T at the start of 2026. The SpaceX IPO, while enormous, represents roughly 0.1% of total American market capitalization.

Globalization also provides some cushion. If a significant share of IPO funding comes from international sovereign wealth funds or bond investors — rather than equity holders selling existing stocks — the domestic market is spared a direct hit.

“Today’s stock market has a few modern counter-forces that didn’t exist in past decades,” Ye said.

Venture capital and private equity funds are also sitting on record levels of undeployed cash. If early SpaceX insiders sell their shares following the IPO, that money may be quickly recycled back into other stocks, softening any liquidity shock to the broader market.

Research firm Morningstar has also raised serious questions about SpaceX’s valuation, estimating the company’s fair value at US$63 (~C$89) a share, which is a 53% discount to its US$135 (~C$190) IPO price. In its own prospectus, SpaceX acknowledged it has “a history of net losses and may not achieve profitability in the future.”