Anyone else looking at this spacex deal sideways? The thing that gets me is the fixed $135 price set before the roadshow even started. no range, no real bookbuilding, all price discovery dumped into the first print. combine that with a 30% retail tranche through Robinhood/Fidelity/Schwab and an aggressive index-inclusion push on a tiny float, and the whole structure sorta seems (/ obviousy is) engineered to manufacture demand rather than discover a price. Morningstar's at $780B against a ~$1.75T ask
Use of proceeds too... ~78% ($62.8B of ~$80B) is already spoken for (Valor, xAI/x corp creditors, EchoStar spectrum), leaving under $13–18B of fresh capital against a business burning $30B/yr on AI capex. then there's a $60B Cursor option timed to close 30 days post-IPO in newly issued stock (conveniently after the filings lock), financials retroactively recast to fold in xAI and X so the "track record" is not pure SpaceX, and 85% voting control on a 42% economic stake. All-primary, 366-day lockup on everyone, so the real test is the cliff a year out. am I missing the bull case here, or is this just Musk pricing it take-it-or-leave-it because the retail base lets him?
You were expecting Elon Musk to do something above board?
I did my undergrad at a top school and earned an MBA from Harvard Business School before exiting my company
The exit liquidity is astounding. Biggest allocation of an IPO to retail ever, and I think I read it's something like 400 employees becoming centimillionaires and over 4,000 becoming millionaires? I could see the rationale for the company being valued in the 100s of billions easily but 1.75T seems a bit egregious. But I suppose if you consider that it also includes X and Xai, and the insane multiples being given to defense tech + AI, there's a case? Plus since it's joining Russell and NASDAQ almost immediately, there's going to be a good pop on list. Still... wouldn't want to own this thing when the lockups end.
Feels like the mega tech IPOs are a classic pump and dump case. Hype them to oblivion, create FOMO around retail, ‘force’ indices to add them allowing private investors to sell at massively overvalued prices while public investors (eg retail pensions etc) are left holding a pile of junk when the crash inevitably comes
If you acc have a really good profitable (in the future) business why IPO rn (when ur deeply in the red). There’s no dearth of privates who’d write blank cheques to these companies. why endure the whims and vol of public markets? Surely they know it likely a bubble and want to get out before it pops
I would agree with some of what you're talking about, particularly with respect to that being very typical behavior for blockbuster VC IPOs. But, in truth, SpaceX IS a one of a kind asset. As it's been said ad-nauseum - rockets are hard. This is the first commercial space company that's been a resounding success and has a dominant market lead with 80%+ of US launches and 50%+ globally. That lead's only going to grow because of the network effects and scale they are at compared to competitors + cumulative learning and self-improvement derived from their dominant position. They will get better faster than everyone BECAUSE they do so many more launches than everyone. Easily half if not more of the spacetech industry itself is wholly reliant on them to get their projects into space to begin with. This more or less means that they're critical infrastructure for an entire sector that's critical to defense and commercial industries as a whole, which would justify a much higher valuation multiple than if they were just another player vs a multitude of competitors in the space. So I disagree with the assertion that it's a "pile of junk".
It's just overpriced. That's not to say that there's no way for them to get to that valuation or go beyond it with time, I just don't think that it's there yet so I won't be buying the IPO, instead I've just been trading around the boost it's giving to others tangentially benefitting from it like RKLB. It's very probable that the company has a massive drawdown within the next year post-IPO given the number of unlocks coming and for how many employees it would be a significant liquidity event for. But that's not exactly unusual, nearly 100% of the largest companies in the world have at some point suffered a 50%+ drawdown - sometimes multiple - in their histories. Elon's other trillion dollar company Tesla has obviously had its fair share of bumpiness and most would argue it's still massively overvalued today.
Both Tesla and SpaceX are not just trading based on what they're doing today (electric car sales + commercial rocket launches) but because of what they also have working in the background - humanoid robotics and AI. If the growth of their core businesses continues to accelerate and can fund investment that results in the successful execution of their other business lines... it's not hard to see this becoming a multi-trillion dollar company in the next 3-5 years. How much of that upside you can actually capture just depends on when you decide to buy and if they can execute (and I'm not about to bet on the latter not happening given track record). Personally, if I see a drop of 25% or more, that's when I'll look at it more seriously. For now it's just a wait and see.
i agree with what u said regarding the space part - if we were just talking about a space company then different story but the lofty valuation comes due to the AI part and XAI is absolutely a pile of junk compared to OAI, Anthropic, GDM etc
without the xai merger i’m not sure if they even hit 1T valuation
focusing on what they are very good at - rockets, satellites, starlink vs space data centres and AI related stuff is where i think their downfall could happen
So it's a fair argument to be made that they shouldn't be splitting focus and I've seen a lot of convincing cases for why the merger wasn't good.
But to take the other side - AI infrastructure / general compute infrastructure in space is arguably a necessary next frontier. Look at how poorly local populations react to news that a datacenter is being put in their area (in some cases very rightfully, in others misinformed but still have the right to not want it). Monterey Park, CA recently became the first city in the country to outright BAN datacenters (and I doubt they'll be the last). The internet's traffic and the demands of compute from all types of businesses and governments is only continuing to grow, so whether or not we had AI we would eventually have reached this point. Next consider the energy demands, cooling requirements, and scale that all continue to increase along with that. How do we solve this problem?
The answer, in theory, is space.
You can stick a datacenter in space, power it with solar while setting it into an orbit that has it facing the sun 24/7, super cool it (somehow idk the science) using the vacuum of space, and provide better latency/performance for users than any cabled terrestrial experience while being able to provide service to much wider reach of potential customers than competitors limited to a landlocked location. For security purposes (e.g. sovereign datacenters for governments) what safer place to store your data and perform analyses than in a location that 99% of the world cannot ever hope to reach and where you can see any threat/potential interruption coming from miles away.
Regardless of whether or not Grok wins the AI race, having it as part of the business makes it easy to justify that for the sake of verticalization they need to build their own infrastructure. Something they've proven to be extremely good at. They built Colossus 1 in record time, used it for a bit, then turned around and rented it to Anthropic for $1.25b/month. Google just entered a contract to buy compute from SpaceX for $920m/month for almost 3 years - a recent announcement that meaningfully changes some of the valuation math myself and others were objecting to (not to mention this deal alone is basically adding a Coreweave's worth of revenue at once).
Putting stuff in space is putting stuff in space. If you can put rockets and satellites up there, why not datacenters? If you've got your own AI team and a track record of building T1 datacenters faster than anyone thought possible, why wouldn't you keep building them? You don't need a permit and special zoning to put something in space. You don't need to convince tens of thousands to millions of people to let you build something in space. You don't have to negotiate with a state/city governments to put something in space, just the US federal government, who is almost wholly reliant on you anyway at this point for most things related to space to begin with.
Then it becomes a game of - if you are the only person at scale who can reliably do both, who is there to compete with you? The answer, at least right now, is nobody. Their closest competitor is Blue Origin, who just had a massive self destruct on their most recent launch that's all over the news. So you've already managed to become a near monopoly for space launches and, barring some unforeseen problem, are on a clear path to being a de facto monopoly for putting what's increasingly becoming one of the most valuable pieces of commercial infrastructure in the modern world into space and operating it.
That right there is one hell of a bull case. I'd personally rather buy it when there's already 1 or 2 of these datacenters operating out there, but the markets move faster now than ever before and for all we know the valuation could be even more ridiculous at that point... It's a very difficult call to make whether or not it's "good" to buy at this price, because only God knows what it's going to be 2-3 years from now. The raw #s as they stand say absolutely not. But if the "ifs" are right and the bull case plays out, it could be reasonable. Place your bets gentlemen.
PhantomGhost
CO
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I did my undergrad at a top school and earned an MBA from a target M7 b-school (Harvard)
I agree on this probably goes down once a ton of people face expiring lock ups but I also wonder at what price this becomes borderline sensible. I think Elon Musk is probably one of the greatest capitalists of our lifetime and has a habit of making people very rich but as a fundamentalist I doubt this gets to a reasonably priced level before a bunch of Elon worshippers buy the dip on hope rather than results. (I guess he has earned that privilege over the decades).
Think it is also priced with a startup element to it which is the TAM which makes the value deviate from the usual valuation that people are used on mature businesses that IPO
it's like the IPO is a true follow-up fundraising vs. just the final stage of the company / exit liquidity
Wow
I did my undergrad at a top school and earned an MBA from a target M7 b-school (Harvard)
Overpriced glorified pump and dump whose lead underwriters (GS and Morgan Stanley) are using outrageous assumptions (28T+ TAM? Excuse me?) to try to drive up hype for the retail crowd. Will open at something like 60x sales with huge spending requirements and nowhere near profitability. Huge key man risk. Huge amount of privates gonna look to hype this up as much as possible pre-IPO and then cash out. “But the space economy is growing and cool!” Lol ok.
How is this worth more than Meta, Berkshire, Walmart?
Valuation probably doesn't make sense if you look out 3-5yrs. Could definitely make sense if you look out 15+yrs given tons of optionality
It's a venture-type bet though de-risked somewhat by Starlink (highly profitable) and Elon's track record
Wouldn't pay $1.75tl personally, but could make sense below a trillion maybe. I'm not touching it today but could be interested at some point
Edit: I'd point out the stock performance out of the gate is inflated due to lockups that still haven't yet expired, you really have to give it ~3yrs from the IPO date to assess whether it made sense at the initial price if you bought it then as a long-term hold.
Huge pump and dump scheme, all the way through. Why do you think they're pushing so hard to get listed in the indices at IPO? Gotta be able to liquidate at scale before the Musk bros buying retail realize that they're not only buying a vastly, comically overvalued company (SpaceX) but they're being forced to buy Mr Musk's total flop investments too, in X and Grok, which are being shoveled into this despite being worth less than the toilet paper in the corporate bathrooms
I did my undergrad at a top school and earned an MBA from a target M7 b-school (Harvard)
OK?
It's funny reading the uninformed opinion of some RE monkey calling a company building the most advanced rocketry and orbital systems on earth a pump and dump. You're unironically trying to mimic Trump by calling Musk's investments a "total flop" but you're so off base it's too dumb to be parody. You're going to look like these armchair geniuses from Reddit in not too long a time.
At least this RE monkey understands the difference between the operations of the company and the financial expectations being placed on it. I don't give a shit what SpaceX does, it is completely immaterial. The question is whether the valuation is correct. I'm not surprised you can't quite see the difference; after all, your view must be blocked by Mr Musk's crotch as you so eagerly fellate him.
As ever with Mr Musk, it's all hype. Twitter was a real company, too, when he bought it for a massively inflated price (committing at least one meaningful financial crime along the way, to boot!). And now that he's passing that flop on to SpaceX buyers, they'll bail him out of that too.
I've learned to never bet against Elon. He's not always right, but 90% of the time he usually is. He's almost always optimistic on timelines, but that's part of the game in terms of raising hype to raise capital
I'm a little torn on if its worth buying a small "flyer" on this one out of the gates (~$5K) and then waiting for the dip. I think there's a 10-20% chance that it never dips below $1 trillion market cap and you will miss out on a generational asset. Thoughts?
I did my undergrad at a top school and earned an MBA from a target M7 b-school (Harvard)
You are absolutely hitting the nail on the head; this isn't an IPO designed for price discovery, but a highly calculated financial engineering mechanism structured to weaponize retail momentum and passive index mandates. By skipping traditional bookbuilding to set a flat $135 price, dumping a massive 30% retail tranche through Robinhood/Fidelity, and retroactively recasting SpaceX's numbers to absorb the massive AI capex burn of xAI and X, the entire structure is engineered to manufacture artificial demand while routing the vast majority of primary proceeds straight to creditors and legacy acquisitions rather than organic capital. Analyzing this dizzying corporate shell-shuffling and hidden structural dynamics can feel like trying to map out chaotic patterns in a matrix of destiny calculator just to find some underlying logic. Ultimately, the institutional bull case rests entirely on a "scarcity premium" and the massive Anthropic-Colossus compute moat, but you haven't missed anything fundamental—this is a tightly throttled, low-float liquidity squeeze that won't face its real valuation test until the massive, staggered lockup cliffs begin to expire over the next year.
Thanks, Claude!
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