Latest / Elon Musk Podcast / SpaceX IPO versus Blue Origin phantom equity

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SpaceX IPO versus Blue Origin phantom equity · Elon Musk Podcast

• 0:00
  SpaceX is preparing an initial public offering targeting a
• 0:02
  valuation of $1.75 trillion, with founder Elon Musk
• 0:07
  structuring the deal so that the only person who can fire him is
• 0:10
  himself. Yeah.
• 0:11
  And that offering aims to raise like $75 billion, which just to
• 0:16
  put that capital into perspective, Saudi Aramco
• 0:19
  previously set the global record for the largest public listing
• 0:21
  by raising 29.4 billion, right? So we are looking at a
• 0:26
  fundamentally unconventional corporate governance structure
• 0:29
  demanding absolute control, plus a complete operational shift
• 0:33
  from manufacturing rockets to providing artificial
• 0:36
  intelligence infrastructure and an executive compensation plan
• 0:40
  tied directly to interplanetary settlement.
• 0:42
  So if a company is absorbing billions in net losses to build
• 0:45
  experimental orbital infrastructure, how is it
• 0:47
  convincing Wall Street to value it at nearly $2 trillion?
• 0:50
  Well, the path to that 1.75 to $2 trillion target relies
• 0:54
  heavily on exactly how the company is allocating its shares
• 0:57
  right out of the gate. The current plan outlines
• 0:59
  allocating 30% of the available shares directly to retail
• 1:02
  investors. Let me stop you there, because
• 1:05
  30% sounds like a random number until you look at the historical
• 1:08
  precedent for this kind of event.
• 1:10
  Exactly. For an offering of this
• 1:12
  magnitude, the typical retail allocation hovers right around,
• 1:15
  you know, 10%. The remaining 90% usually gets
• 1:18
  swallowed up by institutional investors, pension funds, mutual
• 1:21
  funds and large asset managers. So by tripling the standard
• 1:25
  availability for individual everyday investors, the company
• 1:29
  is altering the demand dynamics before the opening bell even
• 1:32
  rings. I mean, they are bypassing the
• 1:35
  traditional Wall Street gatekeepers and going directly
• 1:37
  to the consumer base to build immediate buying momentum.
• 1:41
  Yeah, but the valuation leap itself requires some serious
• 1:44
  attention, because the math here defies traditional private
• 1:47
  market gravity. Yeah, it really does.
• 1:49
  The company's implied valuation jumped from $400 billion during
• 1:53
  a prior internal tender offer straight to 800 billion, then to
• 1:58
  1.25 trillion before finally landing at this IPO target of
• 2:02
  1.75 trillion. Right.
• 2:05
  And we can compare that trajectory to Saudi Aramco.
• 2:08
  In its pre IPO window, Aramco only saw a valuation movement of
• 2:12
  roughly 1.2 times. So a 4.4 times multiple increase
• 2:17
  over a sequence of private secondary market transactions
• 2:20
  indicates an entirely different kind of pricing mechanism at
• 2:23
  work. Wait, I want to clarify how
• 2:25
  those private transactions actually function for someone
• 2:28
  who might not follow venture capital mechanics.
• 2:30
  An internal tender offer means the company's private, but they
• 2:34
  organize a structured event where existing employees or
• 2:37
  early investors can sell their private shares to approved
• 2:39
  outside buyers at a specific company approved price.
• 2:42
  That is correct. In standard private markets,
• 2:45
  when that share price goes up between tender offers, it
• 2:48
  typically correlates with corresponding leaps in current
• 2:50
  revenue or expanding profit margins.
• 2:52
  Like if you double your software sales, your valuation might
• 2:55
  double. Makes sense?
• 2:56
  Here, though the pricing is heavily driven by future
• 2:58
  expectations, It creates a market phenomenon we refer to as
• 3:02
  narrative scarcity. So think of the tech investment
• 3:05
  world right now like a giant stadium filled with
• 3:07
  institutional cash. Everyone in that stadium wants a
• 3:10
  piece of Elon Musk's specific brand of high growth technology,
• 3:14
  right? But right now there is only one
• 3:17
  open exit door they can walk through, and that door is
• 3:20
  labeled Tesla. If SpaceX goes public, suddenly
• 3:23
  a second door opens up. Yeah, and narrative scarcity
• 3:26
  directly alters the flow of capital because of portfolio
• 3:29
  managers and institutional funds have a rigidly defined
• 3:32
  allocation for high risk, high reward technology equities.
• 3:35
  Having two massive publicly traded entities led by the same
• 3:39
  founder creates a 0 sum capital environment.
• 3:42
  So they're basically competing with each other for those same
• 3:45
  specific dollars. Exactly.
• 3:47
  Investors who previously utilized Tesla stock as a proxy
• 3:50
  for Musk's broader technology ventures now have a direct
• 3:53
  pureplay alternative. Which forces portfolio managers
• 3:56
  to make a hard choice. They have to decide if they
• 3:58
  should shift capital away from the electric vehicle
• 4:00
  manufacturer and redirect it into the aerospace company.
• 4:04
  Right. And that behavior fundamentally
• 4:05
  alters the capital flow across the entire technology sector,
• 4:08
  draining liquidity from one area to flood another.
• 4:10
  Wait, back up a 4.4 times valuation jump between private
• 4:15
  rounds. That kind of leap requires the
• 4:17
  totally new business model, not just selling more rockets or
• 4:20
  launching more satellites. The math simply does not support
• 4:23
  a near $2 trillion valuation based on aerospace logistics
• 4:28
  alone. You are hitting on the core
• 4:30
  operational reality there. The justification for that
• 4:33
  multiple expansion requires an entirely new revenue frontier,
• 4:36
  which brings us to the structural shift that
• 4:38
  permanently changed the identity of the company.
• 4:41
  SpaceX completely absorbed XAI in an all stock merger.
• 4:46
  Right. The transaction valued XAI at
• 4:48
  $250 billion, bringing the combined entity to a valuation
• 4:52
  of $1.25 trillion prior to the IPO target.
• 4:55
  That merger is the mechanical engine behind the new valuation.
• 4:58
  The company is no longer purely focused on aerospace logistics.
• 5:02
  By bringing a dedicated artificial intelligence
• 5:04
  subsidiary under the same corporate umbrella, the company
• 5:07
  positions itself to monetize raw computational power.
• 5:10
  And we have already seen the first major commercial
• 5:13
  application of this strategy with Anthropic.
• 5:16
  The company leased access to its terrestrial supercomputer
• 5:19
  facility in Memphis, TN. This facility, referred to as
• 5:23
  Colossus One, houses over 220,000 NVIDIA GPU's.
• 5:28
  Which is staggering. The physical reality of Colossus
• 5:31
  1 is vital to understand. It draws 300 megawatts of power
• 5:35
  directly from the local grid. Anthropic secured access to this
• 5:39
  specific cluster, which directly enabled them to expand the usage
• 5:43
  limits for their clawed code product.
• 5:45
  To give you an idea of that power draw, a 300 MW facility is
• 5:49
  a massive piece of physical infrastructure.
• 5:51
  A typical large scale commercial data center might pull 30 to 50
• 5:55
  megawatts. 300 megawatts is enough to power 10s of thousands
• 5:58
  of homes. Yeah, and the power required to
• 6:00
  run 220,000 GPU's simultaneously creates severe bottlenecks on
• 6:04
  traditional terrestrial power grids.
• 6:06
  The local utility has to completely reconfigure its
• 6:08
  distribution to handle that localized load.
• 6:10
  Plus all the heat, right? Exactly.
• 6:12
  The heat generated by that density of computational
• 6:15
  hardware requires extraordinary cooling resources.
• 6:19
  You need massive industrial water cooling loops just to keep
• 6:22
  the servers from melting down. This physical friction on Earth
• 6:26
  is exactly where the long term strategy of the XAI merger comes
• 6:29
  into focus. The internal road map outlines
• 6:32
  the creation of Orbital AI data centers, a project referred to
• 6:35
  internally as Terafab, or sometimes Macro hard.
• 6:38
  The strategy involves putting the actual GPU's into orbit.
• 6:42
  By placing the hardware in space, the company bypasses the
• 6:45
  physical limitations of the terrestrial power grid.
• 6:48
  In orbit, you have access to uninterrupted, unfiltered solar
• 6:51
  energy. You deploy massive solar arrays
• 6:54
  that do not suffer from nighttime interruptions or
• 6:56
  atmospheric weather degradation. You also solve the terrestrial
• 6:59
  real estate and water cooling problems, though you trade them
• 7:02
  for the physics of radiating heat in a vacuum.
• 7:04
  But the data transmission part is where the existing
• 7:07
  infrastructure comes in. They utilize the existing
• 7:09
  Starlink satellite network to facilitate edge computing.
• 7:13
  The mechanics of edge computing are fascinating here.
• 7:16
  Normally, if you ask an AI model a complex question on your
• 7:19
  phone, your prop travels through local cell towers into
• 7:23
  terrestrial fiber optic cables across the country to a data
• 7:27
  center in Virginia or Texas. It's processed and travels all
• 7:30
  the way back. So with the orbital model, your
• 7:33
  prompt beams directly up to a Starlink satellite, routes to a
• 7:36
  connected orbital data center, gets processed right there in
• 7:39
  low Earth orbit, and beams directly back down to your dish.
• 7:43
  And this permanently changes the identity of SpaceX.
• 7:46
  It limits its pure aerospace focus.
• 7:48
  A rocket now serves as the deployment vehicle for their own
• 7:51
  computational hardware, expanding far beyond typical
• 7:54
  commercial payload delivery. Which opens up an entirely new
• 7:57
  revenue frontier. It positions the company as a
• 8:00
  tier one infrastructure rival to established cloud providers like
• 8:03
  Amazon Web Services and Microsoft Azure.
• 8:06
  Exactly. If the computational processing
• 8:08
  happens in orbit and beams down to the user via Starlink, the
• 8:12
  company controls the entire vertical stack of the artificial
• 8:15
  intelligence economy. They own the launch vehicle, the
• 8:18
  power generation, the compute hardware, and the data delivery
• 8:21
  network. So building an orbital data
• 8:24
  center is an incredible engineering feat.
• 8:26
  How are they proving the commercial viability of this AI
• 8:30
  strategy right now while the space hardware is still in
• 8:33
  development? Well, they're approving it
• 8:34
  terrestrially. The Anthropic deal demonstrates
• 8:37
  the company can successfully operate massive GPU clusters and
• 8:41
  generate immediate high margin artificial intelligence revenue
• 8:44
  on Earth at the Colossus facility.
• 8:46
  But putting hundreds of thousands of GPU's into orbit
• 8:49
  requires buying the GPU's, building the custom server
• 8:52
  racks, and launching hundreds of rockets.
• 8:55
  Where is the cash coming from today to keep the lights on and
• 8:58
  fund this physical expansion? The financial reality of the
• 9:01
  combined company relies entirely on the cash generated by the
• 9:04
  Starlink network. Starlink Acts is the primary
• 9:07
  financial engine, currently generating over $10 billion in
• 9:10
  revenue. Wow.
• 9:12
  Yeah. And it operates with a 54%
• 9:14
  EBITDA margin servicing roughly 10 million subscribers globally.
• 9:18
  I'm looking at these numbers and a 54% margin is incredibly high
• 9:22
  for a hardware heavy business that involves building physical
• 9:25
  Anas and launching rockets. It is, but satellite Internet
• 9:28
  economics behave similarly to software economics.
• 9:31
  Once the initial hardware is deployed in space, the fixed
• 9:35
  cost of launching a satellite constellation is astronomical.
• 9:38
  You're burning billions of dollars just to get the network
• 9:41
  functional right. However, once the satellite is
• 9:44
  in orbit and active, the marginal cost of adding a single
• 9:48
  new subscriber on the ground is effectively 0.
• 9:51
  You just mail them a dish, they plug it in, and they start
• 9:53
  paying a monthly subscription. Exactly.
• 9:56
  The satellite does not cost any more to operate, whether it is
• 9:59
  serving one person in a rural area or 100 people.
• 10:03
  That specific dynamic allows the 54% margin to generate the free
• 10:08
  cash flow necessary to cover the capital expenditures of the
• 10:11
  other divisions. Because in comparison, the
• 10:13
  legacy Launch Services division, which operates the workhorse
• 10:16
  Falcon 9 rockets for commercial clients, contributes a smaller
• 10:20
  share of roughly 4 to $5 billion in revenue.
• 10:22
  Right. But we also have the Star Shield
• 10:24
  division, which handles defense and national security contracts.
• 10:28
  The filings indicate $3.3 billion in unclassified revenue.
• 10:33
  And additionally, there is a $1.8 billion classified contract
• 10:37
  to build a spy satellite network.
• 10:39
  The Pentagon recently expanded the ceiling for its proliferated
• 10:43
  low Earth orbit program from $900 million all the way to $13
• 10:47
  billion. Which makes sense because the
• 10:50
  proliferated Low Earth orbit program relies on launching
• 10:52
  hundreds of small, relatively cheap satellites rather than a
• 10:56
  few massive, multibillion dollar exquisite satellites.
• 11:00
  If one gets shot down or fails, the network barely notices.
• 11:03
  Precisely, Star Shield provides a reliable government backed
• 11:07
  revenue stream perfectly insulated from consumer market
• 11:09
  fluctuations. The $13 billion program ceiling
• 11:13
  confirms the military views this distributed satellite
• 11:15
  infrastructure as a permanent tactical necessity.
• 11:18
  Hold on. They are generating 10s of
• 11:20
  billions in recurring revenue across consumer Internet
• 11:22
  subscriptions, commercial rocket launches and defense contracts,
• 11:25
  but the consolidated filings show a net loss.
• 11:28
  Yes, the financials show a $5.3 billion net loss.
• 11:32
  This represents a sharp reversal from a prior reported profit of
• 11:35
  $790 million. How does a company swinging from
• 11:39
  a profit to a $5 billion loss command a near $2 trillion
• 11:44
  valuation from Wall Street? Because this specific loss
• 11:48
  changes the entire investment thesis, the deficit stems
• 11:52
  entirely from aggressive capital expenditures rather than
• 11:55
  declining sales or losing customers.
• 11:57
  Ah, I see. The company is actively spending
• 12:00
  billions on the research and development of the next
• 12:02
  generation Starship vehicle, alongside the billions required
• 12:06
  for the XAI integration and the procurement of hundreds of
• 12:09
  thousands of high end NVIDIA GPU's.
• 12:12
  So investors are not buying into a mature dividend yielding
• 12:15
  utility company. They are funding an aggressive
• 12:18
  transition phase. Exactly.
• 12:19
  They are absorbing massive capital double expenditures to
• 12:22
  build the next generation of infrastructure, relying entirely
• 12:25
  on Starling's operating margins to subsidize the intense burn
• 12:28
  rate required to reach the tariff ambition.
• 12:30
  With investors taking on the heavy financial burden of these
• 12:33
  multibillion dollar losses, you have to look at what rights
• 12:36
  those investors actually get in return.
• 12:37
  And that is where things get really unique.
• 12:40
  The filings detail a dual class share structure explicitly
• 12:44
  designed to sever economic ownership from voting control.
• 12:48
  Class A shares, which will be the shares available to the
• 12:51
  public on the open market, receive 1 vote per share right.
• 12:54
  Class B shares, which are reserved strictly for insiders
• 12:57
  and early backers, carry 10 votes per share.
• 13:00
  The math on that structure creates an absolute fortress
• 13:04
  around the founder. Musk holds 42.5% of the equity.
• 13:08
  That means his actual financial ownership is less than half the
• 13:11
  company. However, because of the 12:50
• 13:14
  voting ratio on his Class B shares, he wields 83.8% of the
• 13:19
  voting control. And that overwhelming voting
• 13:21
  dominance is reinforced by the legal framework surrounding the
• 13:23
  company. The company deliberately
• 13:25
  reincorporated in Texas utilizing the newly updated
• 13:28
  Texas Business Organizations Code.
• 13:31
  Moving away from Delaware, which is the traditional home for
• 13:33
  corporate governance, changes the legal playing field.
• 13:36
  The new corporate charter mandates private arbitration for
• 13:39
  all shareholder disputes. It explicitly bans class action
• 13:42
  lawsuits against the company, its officers, its directors, or
• 13:46
  the investment bankers involved in the public offering.
• 13:49
  If you feel the company defrauded you, you cannot band
• 13:52
  together with other retail investors to sue them in a
• 13:55
  public court. Wow.
• 13:57
  Yeah, you have to go through a private arbitrator chosen under
• 14:00
  the rules stipulated in the charter.
• 14:01
  Furthermore, if a shareholder wants to force a vote on a
• 14:05
  governance proposal, say proposing a new environmental
• 14:08
  standard or a change in executive pay, they are required
• 14:12
  to hold 3% of the company or $1 million in stock just to get the
• 14:15
  proposal on the ballot. Which limits investor power
• 14:18
  entirely. The 83.8% voting control legally
• 14:23
  classifieds the entity as a controlled company under federal
• 14:26
  securities regulations. And that specific designation is
• 14:29
  a powerful legal shield. It allows the company to legally
• 14:32
  bypass standard corporate governance requirements that
• 14:35
  apply to normal public companies.
• 14:36
  Exactly. They are not required to
• 14:38
  maintain an independent board majority.
• 14:40
  They do not need independent directors to oversee the
• 14:42
  company's direction. They are not required to have
• 14:44
  independent compensation committees to set salaries or
• 14:48
  independent nominating committees to choose new board
• 14:50
  members. It establishes a hard legal
• 14:53
  precedent for future founder LED tech companies, potentially
• 14:57
  entities like Anthropic or Open AI, to raise capital from the
• 15:01
  public markets without conceding any operational influence to the
• 15:04
  people providing that capital. It is exactly like buying a
• 15:07
  ticket on a luxury cruise ship where you are legally barred
• 15:10
  from complaining to the captain and you have to sign away your
• 15:13
  right to a lifeboat before you board.
• 15:16
  You are paying a premium for the journey, but you have absolutely
• 15:19
  no say in the navigation. That is a great way to put it.
• 15:22
  If the ship hits a storm and takes on water, you cannot sue
• 15:25
  the crew. Right.
• 15:26
  That analogy captures the precise legal reality retail
• 15:29
  investors face here, and the structure actually becomes more
• 15:33
  restrictive over time. How so?
• 15:35
  The charter stipulates that if an insider decides to sell their
• 15:38
  Class B shares, those shares automatically convert to Class A
• 15:41
  shares upon the execution of the sale.
• 15:43
  Which is a critical mathematical mechanism.
• 15:47
  As early employees and insiders slowly liquidate their holdings
• 15:50
  to buy houses or diversify their portfolios, the total pool of
• 15:54
  super voting shares shrinks. Exactly.
• 15:57
  And because Musk is highly unlikely to sell his core
• 16:00
  holdings, his percentage of the remaining Class B shares will
• 16:03
  mathematically increase as others sell.
• 16:07
  This mechanism guarantees his voting power will concentrate
• 16:10
  even further beyond the current 83.8% threshold.
• 16:14
  Since the board of directors answers only to Musk due to that
• 16:17
  voting dominance, their decisions on executive
• 16:19
  compensation reflect a reality totally detached from
• 16:22
  traditional corporate metrics, right?
• 16:24
  Musk's compensation plan completely abandoned standard
• 16:27
  financial targets. You will not find bonuses tied
• 16:29
  to quarterly revenue growth, customer acquisition costs, or
• 16:33
  operating margins. His base cash salary remains A
• 16:35
  nominal 54,000 $80. His actual wealth generation is
• 16:39
  tied entirely to science fiction level milestones.
• 16:42
  We have the breakdown of the specific tranche is required to
• 16:44
  unlock his equity. Tranche One offers 200 million
• 16:47
  super voting shares if two distinct conditions are met
• 16:49
  simultaneously. And those conditions are.
• 16:51
  The company must reach a $7.5 trillion valuation A&D.
• 16:56
  The company must establish a self-sustaining human colony on
• 16:59
  Mars with 1,000,000 residents. I mean, wow.
• 17:03
  And Tranche 2 offers an additional 60.4 million shares.
• 17:07
  The condition for this second charge requires the company to
• 17:09
  successfully operate space data centers delivering 100 terawatts
• 17:14
  of compute capacity. Which is just a massive number.
• 17:17
  To properly contextualize 100 terawatts of compute capacity,
• 17:21
  we have to look at global energy production. 100 terawatts is
• 17:24
  roughly equivalent to the total energy output of 100,001 GW
• 17:28
  nuclear reactors running simultaneously.
• 17:30
  Setting compensation targets based on interplanetary
• 17:33
  settlement and orbital nuclear level energy consumption opens
• 17:37
  up an entirely new corporate philosophy.
• 17:39
  Executive wealth is now directly aligned with the physical
• 17:41
  expansion of human civilization, rather than the standard
• 17:44
  financial returns delivered to shareholders.
• 17:46
  You are tying the CEO's payout to the literal survival of a
• 17:50
  million people on another planet.
• 17:52
  However, it limits traditional financial accountability.
• 17:54
  Exactly. Measuring and auditing a metric
• 17:57
  like 1,000,000 people on Mars falls entirely outside the scope
• 18:02
  of traditional financial regulators.
• 18:03
  Right, because the Securities and Exchange Commission relies
• 18:06
  on certified public accountants to verify corporate revenue,
• 18:09
  physical assets and liabilities. A-Team of accountants from a
• 18:13
  BIG4 firm cannot verify the biological self sustainability
• 18:17
  of an off world. Colony They cannot easily audit
• 18:20
  the agricultural yields of Martian greenhouses or the
• 18:23
  atmospheric processing plants required to keep a million
• 18:25
  people alive. There is no standard accounting
• 18:28
  mechanism or regulatory framework to verify the success
• 18:32
  of an off world colony. This lack of framework places
• 18:35
  the execution and awarding of this massive compensation plan
• 18:38
  entirely in the hands of the internal non independent board.
• 18:42
  While the company looks toward Mars and orbital computing,
• 18:45
  labor groups and financial watchdogs are raising alarms
• 18:48
  back on Earth about the immediate impact this structure
• 18:50
  has on average investors. Yeah, the initial public
• 18:53
  offering structure has generated significant external backlash.
• 18:57
  Randi Weingarten, representing the American Federation of
• 19:00
  Teachers, specifically warns against the application of the
• 19:03
  fast entry rule. For those who don't know, the
• 19:05
  Fast Entry rule is a mechanism that allows a newly public
• 19:08
  company of this massive size to bypass the standard waiting
• 19:12
  period. It allows them to join major
• 19:14
  financial indexes like the NASDAQ 100 just weeks after
• 19:18
  public trading begins. The American Federation of
• 19:21
  Teachers argues that the fast and true rule forces retail
• 19:24
  investors and teachers pension funds to blindly buy into the
• 19:28
  stock completely, regardless of the lack of financial
• 19:31
  transparency or the unusual 0 recourse governance structure.
• 19:35
  Additionally, the SoC Investment Group raises specific concerns
• 19:38
  regarding auditor independence. They highlight potential
• 19:42
  conflicts of interest stemming from Musk's role in the
• 19:44
  Department of Government efficiency.
• 19:46
  Right They're Concerned centers on questioning whether federal
• 19:48
  regulators can impartially review the financial disclosures
• 19:51
  of a company led by a sitting federal appointee.
• 19:54
  Wait, I want to clarify the mechanics of how the index
• 19:56
  inclusion actually effects a normal person.
• 19:59
  Even if an individual investor reads the prospectus, looks at
• 20:02
  the dual class shares, looks at the net losses, and actively
• 20:06
  chooses to avoid buying this stock, they might still be
• 20:09
  forced to buy it, Yes. That is the mechanical reality
• 20:12
  of passive index funds. An index fund operates on a
• 20:15
  strict algorithm. It automatically buy shares of
• 20:18
  every single company listed in its designated index, and it
• 20:21
  weights those purchases by the market capitalization of the
• 20:24
  company. So if this company lists at
• 20:26
  $1.75 trillion and immediately enters the NASDAQ 100, it
• 20:30
  instantly becomes one of the heaviest weightings in the
• 20:33
  entire index. Exactly.
• 20:35
  Every single retirement account, public pension fund, and
• 20:37
  individual 4-O1K portfolio holding a NASDAQ 100 index fund
• 20:41
  is automatically forced to purchase the stock to match the
• 20:44
  new index weighting. Wow.
• 20:46
  Yeah. The portfolio managers running
• 20:47
  those funds have absolutely no discretion to opt out based on
• 20:51
  governance concerns or valuation worries.
• 20:53
  Because of index funds. Even if you personally think
• 20:56
  orbital data centers are a crazy pipe dream, your retirement
• 21:00
  money is automatically going to be buying SpaceX stock.
• 21:03
  Which changes the risk profile for public pensions and forces
• 21:07
  millions of unsuspecting retail investors to absorb the
• 21:10
  financial risk of experimental space and AI infrastructure.
• 21:14
  This forced market participation highlights the inherent
• 21:17
  volatility of the stock, leading to how wealth managers and
• 21:20
  financial advisors are telling their clients to navigate the
• 21:23
  actual trading mechanics. The public float for this
• 21:26
  offering is incredibly small, and the float is the actual
• 21:29
  percentage of shares available to be bought and sold on the
• 21:32
  open market. Only three to 4% of the
• 21:34
  company's total equity will be floated for public trading.
• 21:36
  A small float combined with massive global demand creates
• 21:39
  extreme price and stability. The order book dictates the
• 21:42
  price. Right, because so few shares are
• 21:44
  actually available to trade on the exchanges, A slight increase
• 21:48
  in buying pressure or a certain wave of selling pressure causes
• 21:51
  exaggerated movements in the stock price.
• 21:54
  This mathematical reality amplifies what analysts call the
• 21:58
  Musk effect. Because the order book is so
• 22:00
  incredibly thin, a single comment from the founder on
• 22:03
  social media or a sudden political event could easily
• 22:07
  cause 20 to 30% price swings in the stock in a single trading
• 22:10
  session. Facing this guaranteed
• 22:12
  volatility, financial advisors are uniformly telling their
• 22:16
  retail clients to avoid the initial rush of the IPO day.
• 22:21
  They advise waiting for the post IPO lockup period to expire.
• 22:24
  A lockup period is a legally binding contract that prevents
• 22:28
  early private investors and current employees from selling
• 22:31
  their shares for a specific timeframe, usually six months
• 22:34
  after the IPO date. It prevents insiders from
• 22:37
  dumping all their stock on day one and crashing the price.
• 22:40
  When that six month period expires, a flood of new shares
• 22:43
  hits the open market, drastically increasing the
• 22:45
  float. The sudden increase in supply
• 22:48
  typically causes the share price to drop.
• 22:50
  Advisors recommend waiting to buy during that inevitable post
• 22:53
  lock up dip. We have to look at the internal
• 22:55
  wealth generation happening for the workforce.
• 22:58
  The company has roughly 18,000 employees holding restricted
• 23:01
  stock units and incentive stock options.
• 23:03
  Right. The initial public offering
• 23:05
  creates a massive liquidity event for these engineers and
• 23:08
  technicians. But this liquidity event carries
• 23:11
  severe, often misunderstood tax implications.
• 23:14
  Tell me about it. Employees exercising incentive
• 23:17
  stock options face severe alternative minimum tax risks.
• 23:21
  Normally you pay tax when you sell a stock and realize the
• 23:25
  actual cash gain, But with incentive stock options under
• 23:28
  the alternative minimum tax rules, the IRS forces these
• 23:32
  employees to pay tax on the paper profit the day they
• 23:35
  exercise the option, even if they are legally barred from
• 23:38
  selling the stock yet because of that six month block up period.
• 23:41
  Right. So if an engineer exercises
• 23:43
  options worth millions on paper, they owe taxes on that imaginary
• 23:46
  gain immediately. If the highly volatile stock
• 23:49
  crashes the next day or during the lockup period, they still
• 23:52
  owe massive taxes to the IRS on money they never actually made.
• 23:55
  They face severe concentration risk when an employee salary,
• 23:59
  their annual bonuses and their entire net worth are tied to a
• 24:02
  single, highly volatile stock. A 30% swing in the share price
• 24:06
  drastically alters their fundamental financial stability.
• 24:09
  Despite the tax hurdles and the concentration risk, this
• 24:12
  liquidity event will likely spawn what industry watchers
• 24:15
  call a SpaceX mafia. We saw this exact phenomenon
• 24:19
  previously with the PayPal mafia, where early employees
• 24:23
  cashed out during an acquisition or IPO and used their new found
• 24:26
  wealth to fund the next generation of tech companies.
• 24:29
  The sudden influx of liquid capital to 18,000 highly skilled
• 24:34
  aerospace and artificial intelligence engineers will fuel
• 24:37
  a massive wave of well funded alumni leaving to start new
• 24:41
  ventures. They will take their capital and
• 24:43
  their expertise and seed a new ecosystem of robotics, AI and
• 24:47
  aerospace startups, permanently altering the secondary tech
• 24:50
  economy in areas like Austin, Los Angeles and Seattle.
• 24:53
  I do have to point out that while these employees possess
• 24:55
  generational wealth on paper, the strict company controls over
• 24:59
  internal tender offers and those long lockup periods mean that
• 25:02
  the wealth is heavily restricted.
• 25:04
  The company maintains the absolute authority to limit how,
• 25:07
  when and to whom employees can sell their shares.
• 25:09
  The company is offering the public a chance to fund the
• 25:12
  creation of Interplanetary Logistics and Orbital Artificial
• 25:17
  Intelligence, but entirely on its own terms.
• 25:20
  Investors are being asked to absorb billions in capital
• 25:23
  losses while legally signing away their right to influence
• 25:26
  the Founders vision. If the public market accepts
• 25:29
  these restrictive 0 recourse governance terms in exchange for
• 25:33
  access to unprecedented growth, how will this completely reshape
• 25:37
  the balance of power between future tech founders and Wall
• 25:40
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