Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / Why SpaceX IPO Buyers Are Already Under Water
Transcript
- Lucas: SpaceX finally went public two days ago. And if you're a retail investor who bought shares on the first day, there's a pretty good chance you're already sitting on a paper loss. Luna: Yeah, I saw that headline from CNBC yesterday — the average SpaceX buyer post ipo is almost under water. That is brutal for a debut everyone called the most anticipated of the decade. Lucas: It really is. And it's a perfect case study for what we talk about on this show — the gap between the hype and the actual mechanics of buying into a hot IPO. If our conversations have helped you think about a decision like that differently, you know who we are. We keep this show ad-free, and listener support is what makes that possible. You can help at buy me a coffee dot com slash fexingo. Luna: Absolutely. Even a small contribution goes a long way to keeping this independent. So — back to SpaceX. The stock opened at $120, popped to $135, and then it's been sliding ever since. How does that happen? Lucas: Well, part of it is the allocation. Institutions and insiders got the bulk of shares at the IPO price — $95. Retail investors mostly got in on the first day of trading, when the stock was already trading above $110. So by the time the average person could buy, the easy money was already made. Luna: Right. And then the sellers came in. The early investors who got shares at $95 were happy to take profits at $120 or $130. So the stock drifts down. Lucas: Exactly. And that pattern — the pop and drop — is actually pretty common for mega-IPOs. But what makes SpaceX different is the sheer size of the retail demand. This was the most hyped IPO since maybe Facebook in 2012. And we know how that turned out for early buyers. Luna: Facebook took months to recover above its IPO price. Do you think SpaceX could follow a similar path? Lucas: It's possible, but the context is different. For one, the broader market is in a different place. The S&P 500 is at 7,501 — near all-time highs. The VIX is at 16.40, which is relatively low, but it's been dropping. That suggests complacency. Luna: And the VIX dropped over 7% in the last five days alone. That's a big move for a volatility index. Lucas: It is. And when the VIX is low and falling, IPOs tend to get priced aggressively. Underwriters feel confident they can sell shares at a high valuation. But that also means there's less margin for error. If sentiment shifts even a little, the stock can get hit. Luna: And we've seen some sentiment shift this week. The Russell 2000 is down nearly 1% in five days. Small caps are struggling. That's often an early warning sign for risk appetite. Lucas: Exactly. The Russell 2000 is a better gauge of 'animal spirits' than the S&P 500. When small caps weaken, it often means investors are pulling back from riskier bets. And what's riskier than a newly public SpaceX? Luna: So the retail buyer who chased the IPO might have been caught in a double squeeze — the natural post ipo profit-taking and a broader rotation away from risk. Lucas: That's the thesis. And on top of that, you have a Fed that's sounding more hawkish than the market expected. Chairman Warsh — who took over in March — has been careful not to give a rate forecast, but several FOMC members have hinted at a hike later this year. Luna: Jeffrey Gundlach put it bluntly this week: Warsh is not going to be the 'easy money' chairman many hoped for. Lucas: Yeah. And the bond market is listening. The 10-year Treasury yield is at 4.49%, up from 4.43% a week ago. The 2-year is at 4.20%. The yield curve is still positively sloped — about 27 basis points — but it's flattening slightly. That's not screaming recession, but it's not the kind of easy-money environment that fuels speculative IPOs. Luna: So what's the takeaway for someone who's thinking about buying the next big IPO? Should they just avoid them entirely? Lucas: I wouldn't say avoid entirely, but you have to go in with your eyes open. The first-day pop is often not available to retail. And even if you get in early, the odds are stacked against you. A study from a few years ago looked at IPOs from 2010 to 2020 and found that the average first-day return was about 18%, but the average one-year return was negative. Luna: So the hype fades. And that's especially true for companies with a lot of media attention and high valuations. Lucas: Right. SpaceX is a great company — it's fundamentally strong, it has a huge moat in space launch, and Starlink is a real business. But the IPO price already baked in a lot of optimism. When you buy at $120, you're paying for years of future growth. Any hiccup — a delay, a competitor, a macro shock — and the stock can correct. Luna: And we've seen how quickly that can happen. The stock is already down more than 10% from its first-day high. That's a lot of red for someone who bought at the peak. Lucas: It is. And I think the lesson is the same one we keep coming back to on this show: when everyone is talking about an investment, the easy money has usually already been made. That doesn't mean you can't make money — but you have to have a longer time horizon and a stomach for volatility. Luna: And maybe a plan for how you'll react if the stock drops another 20% before it goes up. Because that's entirely possible. Lucas: Absolutely. And that's where the broader market picture matters. The VIX at 16.40 is low, but the VVIX — the volatility of volatility — is at 88.43 and actually up slightly. That suggests options traders are hedging for bigger moves ahead. So even in a calm market, there's underlying tension. Luna: And the Russell 2000 weakness could be the canary in the coal mine. If small caps continue to slide, it might pull the broader market down with it. Lucas: Exactly. So for anyone sitting on a SpaceX position — or thinking about buying the dip — the key is to ask yourself: can you hold this for five years? Because if you can't, a 10% drop might turn into a 30% drop, and you'll be forced to sell at the worst time. Luna: That's the survival mindset we talk about. It's not about timing the market — it's about having the resilience to stay in. Lucas: Right. And that's what this show is all about. Thanks for listening, and we'll be back tomorrow with another episode.