SpaceX set to surge in stock market debut

SpaceX’s IPO has been an historic market event for its sheer size and the scale of demand for its shares. Ahead of its debut on the Nasdaq, the shares are higher by 30% in the pre market, and could start trading at $175 per share, up from the $135 IPO price, based on prediction markets.  

There is so much enthusiasm for SpaceX right now, that it is hard to see the shares slipping anytime soon. The numbers are huge: SpaceX sold $75bn of shares at its IPO, which valued the company at $1.75 trillion. If the stock pops 30% today, then SpaceX will be worth more than $2.4 trillion. SpaceX’s IPO alone is greater than the amount raised in 22 of the last 25 years, and the its IPO generated more money than all IPOs in the US so far this year.

The shares may not trade straight away when the market opens, usually an IPO with this level of enthusiasm trades a few hours after the opening bell, to ensure a smooth transition to the stock market; to do this bankers will typically want to match buyers and sellers for 10% of shares. This should be easy, as we expect SpaceX to be extremely liquid today. The risk is that there are not enough sellers, and if the stock price is volatile, then circuit breakers could kick in, which may halt trading later today.

SpaceX allocated 20% of its shares to the retail trading community, this is lower than the original estimate of 30%, but is much higher than a typical IPO of this scale. Thus, the market does not know how individual investors will react later today. Will they all rush to the exit if the stock pops? The assumption by some analysts is that they will flip SpaceX stock, but we are not so sure. There is a cult-like status around Elon Musk, and retail investors may want to hold this stock for the long term, to see if Musk’s AI vision can be turned into reality.

Stocks are rallying into the opening bell in the US, European indices are higher by more than 1%, as  investors react to the decline in the oil price, and hopes for a deal to finally be reached between Iran and the US. Interestingly, US index futures are quiet as we lead up to the stock market open. The S&P 500 is set to open up 0.1%, while the Nasdaq could fall 0.2%.

This should not disrupt a surge in SpaceX’s share price and the new kid on the block is likely one of the reasons why the Nasdaq could be volatile today. The SpaceX IPO has upended financial markets in the US. Passive fund managers will need to offload some big tech names to ensure their Nasdaq positions are balanced, as SpaceX treads heavily on the US’s stock market ecosystem. Thus, it could be a volatile end to the week.

It is also worth noting that SpaceX will be the 14^th largest company in the world, and is more highly valued than American stalwarts such as Walmart, JP Morgan and Eli Lilly, not even the world’s largest grocery chain, or the maker of weight loss jabs can compete with Elon Musk’s space/ AI conglomerate.

The CEO of SpaceX has been talking this morning and shedding some light on two important factors: 1, she says that there are similarities between SpaceX and Tesla, which may lead some to speculate that the two firms will merge in the coming months or years. 2, She said that XAI will be ‘product focused’ in the future. They will need to sell a lot of products to justify the current valuation, however, it is worth noting that Musk has a history of bringing his ideas to market, including Tesla’s EVs, Starlink and reusable rocket ships.

It is easy to be bearish about SpaceX, the numbers are incredibly optimistic, however, this is not the story of the day. The IPO is a roaring success, and SpaceX will change the landscape of US stock markets. It will also shift the AI trade from chip socks to imagining an AI-infused reality. The real question that an IPO of this size asks: is SpaceX and the AI trade too big to fail?