Elon Musk and SpaceX rang the Nasdaq opening bell in New York City and Texas.
Reuters
SpaceX (SPCX-Q) shares jumped 19 per cent in their Nasdaq debut on Friday, sending the company’s value past US$2 trillion to make it the sixth-biggest U.S. company by value and turning Elon Musk into the world’s first trillionaire.
Investors jumped at the chance to get a piece of Musk’s sprawling empire spanning rockets, satellites and AI after the record-setting US$75 billion IPO. More than 510 million shares worth about US$84 billion changed hands, even though SpaceX is currently unprofitable and generated only a fraction of the revenue brought in by similarly valued tech giants.
The launch was smoother than many observers expected, with trading kicking off late on Friday morning without the hiccups that marred Meta’s debut in 2012. Shares ended the day at US$160.95 a share to bring its value to US$2.1 trillion. Its debut pushed its market value past Broadcom, with Amazon next in line at US$2.6 trillion.
The trade capped off a lead-up fraught with anxiety over the exchange’s ability to handle the launch, particularly after a recent swoon in technology shares that raised concerns about the stratospheric gains in AI-linked names, and with mega-listings from AI heavyweights Anthropic and OpenAI waiting in the wings.
Investors across the spectrum, from large institutions to retail fans of Mr. Musk, ended the day euphoric.
“For many investors, SpaceX is the closest thing to investing in the railroads during the Industrial Revolution and they are willing to pay the Elon Musk premium for that opportunity,” said Seth Hickle, chief investment officer at Mindset Wealth Management in Indianapolis.
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However, analysts and investors said investors should brace for volatility, particularly early in its life as a public company, due to its small relative float and expensive valuation after it lost nearly US$5 billion last year. Its US$18.7 billion in revenue gives the company a price-to-revenue ratio of roughly 112, far above other megacap stocks.
“The question remains is, what happens in a couple of weeks from now. Right now, people want to bid the stock higher because it’s a winner at this point. Whether it stays that way, that remains to be seen,” said Todd Schoenberger, chief investment officer at Crosscheck Management in Washington.
Retail investors received about 20 per cent of the allocation, far more than the typical IPO, with some even celebrating an allocation of one share.
SpaceX executives, including President Gwynne Shotwell and Chief Financial Officer Bret Johnsen, celebrated at the Nasdaq market site in New York’s Times Square after ringing the opening bell on Friday. Mr. Musk held a separate event for employees in Texas.
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Reuters
The IPO is a culmination of Mr. Musk’s long-held ambitions in space and technology, and has stood out for rewriting Wall Street’s IPO playbook and drawing legions of retail investors into the market.
At US$75 billion, the deal’s proceeds were more than double those of Saudi Aramco’s record-setting 2019 IPO.
The valuation could rise further should underwriters exercise their right to sell additional shares, a decision typically made within 30 days after the offering.
“Seeing the company that I joined when it was just some sketches on paper become this valuable is almost surreal,” said Tom Mueller, a founding SpaceX employee who spent 18 years at the company and shareholder, who is now CEO of Impulse Space, a spacecraft startup.
At least 4,000 current and former SpaceX employees alone held equity stakes worth more than US$1 million at the time of the IPO, according to Hill.com.
Although SpaceX’s lack of profitability makes it ineligible to join the S&P 500, its expected fast-track inclusion in the Nasdaq 100 will soon make it a major holding for passive funds and ETFs that track the index, creating a fresh source of demand for its shares.
It will take about a month before it gets added to that index under Nasdaq’s new fast-entry rules, as opposed to a typical wait of as much as a year.
Some analysts expect SpaceX’s debut to trigger a reshuffling of investor portfolios, creating selling pressure on other technology heavyweights as funds rotate into the stock. On Friday, shares of other space firms and satellite companies declined sharply, with Planet Labs down 9 per cent and EchoStar down 11 per cent.
SpaceX said its market opportunity spans US$28.5 trillion, a figure it called the largest in human history. With its leading position in space - the firm says its operation is responsible for more than four-fifths of the mass launched into orbit over the past three years - and revenues from Starlink, some investors said it has a strong foundation upon which to build.
Some analysts have already issued positive ratings on the company, but Morningstar analysts this month said it is more fairly valued at around $780 billion, and CFRA on Friday started coverage with a sell rating.
“This is not a name you’re buying based on fundamentals. For me, the analogy is Amazon. This was a company that changed the way we live,” said Nancy Tengler, CEO and CIO of Laffer Tengler Investments.
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