"By Friday, however, the macro narratives were entirely overshadowed by the excitement of the SpaceX IPO. It’s an IPO that will go down in history for a remarkable combination of reasons—from its sheer scale ($75 billion, almost three times the previous largest IPO) and the $1.8 trillion valuation (which places it immediately, on day one, as the seventh-most-valuable US company), to challenging the traditional playbook on investor allocation, price discovery, and fast-tracked index inclusion. It has also triggered an unprecedented wave of wealth creation, from Elon Musk’s new trillionaire status to some 4,400 millionaires minted among the firm’s current and former employees. All this for a company that generates no profits, is highly valued, and carries enormous key-person risk."
Excerpted from the weekly substack email from Mohamed A. El-Erian (boldface added).
Musk has special shares that give him 85% of the voting power in SpaceX, while only owning about 40% of the company. This means that he controls the Board and is totally unaccountable; what's even the point of having a Board? I don't understand why the stock markets and regulators allow this kind of structure. (Just kidding, I know why. $$$)
ReplyDeleteMy main exposure to the US market currently is a S&P 500 ETF. The S&P are delaying SpaceX's entry into the index for 12 months I think, by which time I doubt much will be resolved. The vast majority of the IPO shares are in the hands of big venture capital and general investment funds, which will include a lot of people's pension pots.
ReplyDeleteThe scary thing is that they were allowed to have an IPO at all. You've got a profitable business (Starlink), an almost profitable business (SpaceX) and two money pits (Twitter and xAI/Grok). Get a vengeful Democrat administration and a large chunk of Starlink's and almost all of SpaceX's income could come under intense scrutiny. I doubt the Democratic leadership is sufficiently engaged with politics to bother, happy to pick up a pay check and make their real money under the table or insider trading.
SpaceX is just going to be Tesla in space, buoyed by the same misdirection and lies that inflated the car company's share price. It'll work until it doesn't. If the AI bubble pops (no guarantee of that. Anthropic has a business model, most of the others are tied to already huge companies - I would not want to be Open AI in that market) I'm not even sure it would affect SpaceX's valuation that much.
What I do expect to see is a BUNCH of stuff like SpaceX buying Tesla robots, and Tesla spending millions on Starlink and xAI to puff up the balance sheets of both companies. Since they've got all that retirement fund money as a slush fund, why not?
The backs of the US taxpayer know no bounds!
ReplyDeleteA trillionaire can spend $10 million A DAY, every single day of the week...for 274 years.
ReplyDeleteIt is my belief that Elon Musk has a certain cachet about him due to his wealth. It is that, I think, and not Space X itself, that created that great valuation of the stock. Had I been the guy who owned the company (i.e., and unknown), do we suppose that it would have risen so high?
Then this: If we believe that there should be a minimum wage--that is, a person can make too little--why is it not the case on the other end of that spectrum? Surely a person with a trillion dollars of wealth, even if taxed, at 70%, would still be one of the wealthiest people on earth (if not the wealthiest indeed).
I am a capitalist, but it just seems like too many people struggle in life for there to be someone who has so very, very, very much. It's about like someone owning the rivers and the Great Lakes, while some people are thirsty.
And not a word about the fact that this massive company is led by a neonazi who happily threw USAID into the woodchipper. And no word of condemnation to any of the people that shoveled all that money to him.
ReplyDeleteAside from all of that, Musk promised that there would e acolony on Mars by ... checks notes .... last year.
https://www.youtube.com/watch?v=Nsi5_4Ln2YM
He's nowhere near that goal. So how is SpaceX doing well?
I would just like to chime in that my company is a supplier to SpaceX. They have become our top customer and more growth to come. I'll take the benefits from that, rather than the risk of the stock.
ReplyDelete