Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / Why SpaceX IPO Is Redefining the Public Markets
Transcript
- Lucas: So SpaceX is finally going public. The papers were filed, the roadshow is underway, and we're looking at what could be the largest IPO in history—$75 billion being raised, and prediction markets are already pricing a $2 trillion market cap on day one. Luna: Two trillion dollars. That would make it bigger than Amazon, Alphabet, almost every company on earth except maybe Apple and Microsoft. And it all started as a startup that nearly went bankrupt. Lucas: If our money conversations have helped you think about a decision differently—whether it's evaluating an IPO like this or just managing your own portfolio—you can support the show at buy me a coffee dot com slash fexingo. It's what keeps this podcast ad-free and independent. Luna: Yeah, absolutely. Even a small contribution makes a big difference for us. Lucas: So let's get into the details. The raise itself is extraordinary—$75 billion is more than the GDP of many countries. But what I find really interesting is how they're allocating those shares. Luna: Right, I saw that retail investors are only getting about 20 percent of the offering. That's low, even by recent standards. Lucas: It's in the low 20s, according to sources. Compare that to something like Rivian's IPO back in 2021, where retail got closer to 30 percent. SpaceX is clearly favoring institutional investors—pension funds, sovereign wealth funds, the big asset managers. Luna: And that makes sense if you think about who's been backing them for years. The early investors—people like Founders Fund, Valor Equity, even some Saudi and Qatari funds—they've been holding since the early days when the company was worth a fraction of what it is now. Lucas: Exactly. There's a CNBC story about the investors who took a chance on SpaceX early on and are now reaping the rewards. For them, this IPO is a liquidity event decades in the making. But for the average person on Robinhood or Fidelity, getting shares at the IPO price is going to be tough. Luna: Is that necessarily a bad thing? I mean, IPOs often pop on day one, but retail investors who buy at the open sometimes get burned. Remember the Facebook IPO? It was a mess for weeks. Lucas: That's a fair point. But the scale here is different. If SpaceX really does open at a $2 trillion valuation, that's a huge premium over its last private valuation, which I believe was around $1.8 trillion. So the early investors are already sitting on gains. Luna: And yet, the company is still unprofitable, right? I mean, they have massive revenue from launch contracts and Starlink, but they're reinvesting everything into Starship and the Mars program. Lucas: Right. That's the classic growth story. But it's also why I think this IPO is a stress test for the public markets. Can the market absorb a $2 trillion company that doesn't generate net income? It's a bet on future cash flows decades out. Luna: And it comes at a time when we've seen a rotation into value stocks. The Russell 2000 is up over 3 percent in the last five days, while the NASDAQ is basically flat. Big Tech is selling off—Apple down almost 4 percent, Microsoft down over 6 percent. Lucas: That rotation is real. But SpaceX isn't a value stock. It's the ultimate growth story. So if this IPO succeeds despite the rotation, it could signal that the market still has plenty of appetite for high-risk, high-reward bets. Luna: Or it could be the peak of the hype cycle. I'm thinking about the headline that says gold is at a six-month low even as inflation fears rise. If investors are fleeing gold and piling into SpaceX, that's a big sentiment shift. Lucas: It is. Gold is supposed to be the inflation hedge, but it's down. Meanwhile, a rocket company with no earnings is about to become the most valuable public company in the world. That tells you something about where investor psychology is right now. Luna: So let's talk about the mechanics. How does a $75 billion raise actually work? Are they issuing new shares, or is it a secondary offering from existing shareholders? Lucas: It's a mix. The company is issuing some new shares to raise capital for Starship development, but a significant portion is being sold by early investors and employees who want to cash out. That's typical for a big IPO. Luna: And the price? Have they set a range yet? Lucas: Not officially, but whispers are around $400 to $500 per share. That would value the company at roughly $1.8 to $2 trillion at the midpoint. The final price will be set the night before the listing. Luna: So if you're a retail investor and you want in, what's the play? Wait for the first dip? Or try to grab shares on the open? Lucas: Historically, the best approach for most retail investors is to wait. Let the volatility settle. The first few days of trading can be chaotic, especially for a stock with this much hype. There's a good chance it pops, then pulls back. Luna: But what if it doesn't pull back? What if it keeps running like a modern-day Amazon? Lucas: That's the risk you take. But I'd argue that even Amazon had its drawdowns. The key is to have a long-term thesis. If you believe SpaceX will dominate space transportation, satellite internet, and eventually Mars colonization, then the current valuation might be cheap in 20 years. Luna: That's a lot of faith in Elon Musk's timeline. He's notorious for being overly optimistic. Lucas: He is. But the company has a track record of delivering on things that seemed impossible. Reusable rockets, Starlink's constellation, Dragon crew missions. They've proven they can execute. Luna: Still, a $2 trillion market cap means the market is pricing in a lot of future success. I wonder how much of that is Elon Musk's personal brand versus the underlying business. Lucas: That's a great question. If Musk were to step away—god forbid—would the valuation hold? Probably not. The market is definitely pricing in his continued involvement. Luna: So for the stock pickers listening, what's the takeaway? Is this a buy or a wait and see? Lucas: I think for most people, it's a wait and see. The IPO is going to be a spectacle, but the best opportunities often come after the dust settles. If you're a long-term believer, set a target price and be patient. Luna: And if you're not a believer, there are plenty of other stocks in the rotation. The value trade has been working. Lucas: True. But I think this IPO is bigger than just one stock. It's a signal about the future of public markets. If a company can stay private until it's worth nearly $2 trillion, what does that mean for the traditional IPO process? For retail investors? For the whole ecosystem? Luna: It might accelerate the trend of companies staying private longer. And that's not great for the average investor who doesn't have access to private markets. Lucas: Exactly. So SpaceX's IPO is a watershed moment. It's not just a stock; it's a test of whether public markets can still be a place for innovation and growth. Luna: Or whether they become a second-tier venue where companies come only after the big money has been made. Lucas: That's the worry. But for now, we'll be watching the debut closely. And we'll keep you updated on how it plays out.