Which is all sorts of backwards. Debt has liquidation preference over equity. And equity market say spacex has trillion+ of supposed equity buffer before it cuts into debt value

This is incorrect. SpaceX has a trillion in Market Capitalization, not a trillion in Equity. These two concepts are no the same. The equity value is the theoretical intrinsic "worth" of a company, and has a very simple definition: Equity = Assets - Liabilities.

Market capitalization takes into account the future value of the business, while equity (an accounting concept) only looks at present day cash & liabilities.

When a company gets liquidated, the future growth/value of the business is, pretty obviously, zero, so the "market cap" is irrelevant. What matters is what is left over once all debts are liquidated.

SpaceX's equity at the time of their IPO was $34 Billion (it's in the S1!). You can also see in their S1 that their cash decreases by about $8B a year, so unless things change they should be underwater in about 4 years.

If the equity market says something that must make it true. Markets have never gotten valuations wrong