Latest / DEEP INSIGHT / Why SpaceX is rocketing toward largest IPO in stock market history

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Why SpaceX is rocketing toward largest IPO in stock market history · DEEP INSIGHT

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  Speaker 1: SpaceX, the rocket company founded by Elon Musk, will be
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  Speaker 1: going public on Friday and is expected to become the
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  Speaker 1: largest initial public offering, or IPO in stock market history
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  Speaker 1: with the sale of more than five hundred and fifty
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  Speaker 1: five million shares. Musk and the company are looking to
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  Speaker 1: raise roughly seventy five billion dollars that would raise the
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  Speaker 1: company's valuation to about one point seven trillion dollars, automatically
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  Speaker 1: making it the world's most valuable publicly traded company. Nasdaq
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  Speaker 1: and larger index funds will also allow trading and investing
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  Speaker 1: in this company much earlier than normal. Within three weeks,
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  Speaker 1: individual investors alone have already requested more than seventy billion
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  Speaker 1: dollars worth of shares. There are lots of questions about
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  Speaker 1: all of this, and for more. We are joined now
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  Speaker 1: by Ron and Sana ms now, senior business analyst and
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  Speaker 1: author of the Message of the Markets on substack. Ron,
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  Speaker 1: It's always good to see you, especially on a day
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  Speaker 1: like this as we await this IPO. What is it
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  Speaker 1: about space that investors are willing to value it at
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  Speaker 1: a level we've never seen before.
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  Speaker 2: Well, I think to give Elon Musk a great deal
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  Speaker 2: of credit for being an innovator and a business genius,
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  Speaker 2: if you will, you know, having taken over Tesla in
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  Speaker 2: its early days, having built out Starlink, which is one
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  Speaker 2: of the key components of SpaceX, going public, and having
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  Speaker 2: very successfully you know, built and launched rockets into space
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  Speaker 2: at a fraction of the cost that we've seen others
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  Speaker 2: either attempt in the private sector or even you know,
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  Speaker 2: in government operations as well. So they're banking on his
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  Speaker 2: vision of the future where we're going to have data
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  Speaker 2: centers in space that will provide power for artificial intelligence operations,
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  Speaker 2: and hoping that that he can grow into that one
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  Speaker 2: point seven trillion dollar valuation, which might actually be larger
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  Speaker 2: tomorrow once the stock starts to trade and deliver the
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  Speaker 2: types of revenues and profits that would support evaluation that high.
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  Speaker 1: Well, right after reading the prospectus, my question to you was,
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  Speaker 1: are investors buying the company as it exists today or
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  Speaker 1: a vision of what it could become? And at what
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  Speaker 1: point does optimism just become speculation.
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  Speaker 2: Well, I mean, I think the two go hand in hand,
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  Speaker 2: and they are certainly buying the vision, they are not
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  Speaker 2: buying the company as it exists today. With about eighteen
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  Speaker 2: billion dollars in revenue and last year lost about four
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  Speaker 2: point two billion dollars from operations. So no, this is
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  Speaker 2: not the type of company if you look at it
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  Speaker 2: from an earnings perspective, that you would accord on one
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  Speaker 2: point seven trillion dollar valuation.
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  Speaker 3: They're hoping that they can grow into that number.
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  Speaker 2: As some other companies have Obviously, whether it's Microsoft or
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  Speaker 2: whether it's a Google's parent alphabet in Vidia, that's happened
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  Speaker 2: over an extremely long period of time. This is happening
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  Speaker 2: much more quickly. There are concerns, of course, that this
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  Speaker 2: is part of a speculative frenzy that's going on with
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  Speaker 2: anything associated with artificial intelligence, and that the valuation on this,
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  Speaker 2: which you know, when taken in some is larger than
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  Speaker 2: the market valuation of all the IPOs I believe we've
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  Speaker 2: seen since the year two thousand. Visit a very big deal,
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  Speaker 2: and people are going to make their bets and see
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  Speaker 2: whether or not in the long run that vision will
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  Speaker 2: be fulfilled.
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  Speaker 1: Well, right on your substack and on your TikTok videos.
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  Speaker 1: You've been warning retail investors to be careful. What should
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  Speaker 1: regular investors know, especially folks who are interested in buying
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  Speaker 1: shares or at least trying to get shares well.
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  Speaker 2: If they've already gotten an allocation, they've gotten that allocation
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  Speaker 2: at the price of one hundred and thirty five dollars,
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  Speaker 2: which was set officially today.
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  Speaker 3: What often happens, and we've seen this.
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  Speaker 2: The chief investment officer at Truist pointed out that you know,
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  Speaker 2: from the top price that you see early in initial
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  Speaker 2: public offering for hotstocks like this, whether it was Meta
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  Speaker 2: or Ali Baba or some of the other big tech
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  Speaker 2: names that we know, a year later those stocks were
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  Speaker 2: down on average about fifty five percent. So you know,
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  Speaker 2: there are some restrictions on flipping for individual investors, which means,
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  Speaker 2: you know, buying it and selling it immediately after the IPO,
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  Speaker 2: but they should be prepared for a fair amount of volatility.
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  Speaker 2: Unless you see the surge and revenues surge and profitability
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  Speaker 2: at SpaceX that would support the valuation that may exceed
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  Speaker 2: two trillion dollars tomorrow. We're not quite sure exactly where
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  Speaker 2: it's going to open. Some estimates are as high as
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  Speaker 2: one hundred and sixty five dollars a share, which would
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  Speaker 2: provide individuals with the instant profit. Remember also there are
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  Speaker 2: a lot of early investors who are taking profits from
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  Speaker 2: their initial investments in SpaceX and the other components of
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  Speaker 2: that company, They too are exiting, So you don't want
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  Speaker 2: to be the bag folder if indeed this does not.
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  Speaker 3: Live up to its expectations.
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  Speaker 1: Meantime, Open AI and Anthropic are also preparing to go public.
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  Speaker 1: Are we witnessing the beginning of a new AI investment
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  Speaker 1: cycle similar to previous technology booms or is this something
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  Speaker 1: else entirely.
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  Speaker 2: Well, I think we're in the middle of one, and again,
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  Speaker 2: this already dwarfs kind of the capital requirements that we
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  Speaker 2: saw even in the build out of the railroads in
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  Speaker 2: the eighteen seventies in the United States.
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  Speaker 3: This is the enormous capital commitment.
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  Speaker 2: At least this year alone, we'll see about eight hundred
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  Speaker 2: billion dollars put to work for data centers and other
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  Speaker 2: AI infrastructure necessities. Some are estimating that we can see
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  Speaker 2: a trillion dollars spent next year. Now whether or not
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  Speaker 2: that comes to pass remains to be seen. The one
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  Speaker 2: caveat i'd put on this is that it's not just
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  Speaker 2: these companies selling equity in their firms to raise money.
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  Speaker 2: They're also using a fair amount of debt, which, again,
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  Speaker 2: if the companies don't live up to their profit revenue expectations,
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  Speaker 2: we could see a financial market event down the road
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  Speaker 2: if they cannot service that debt or if they don't
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  Speaker 2: need earnings expectations, that could harm their stocks rather significantly.
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  Speaker 2: So I think individuals really need to do some serious
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  Speaker 2: homework around this and make sure that they're not in
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  Speaker 2: the midst of an investing mania and instead making very
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  Speaker 2: rational decisions about how much money they allocate to these
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  Speaker 2: AI plays.
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  Speaker 1: Ron Insana ms now, senior business analyst and the author
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  Speaker 1: of the Message of the Markets on substack.
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  Speaker 3: Ron always a pleasure, Take care same chef.
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