SpaceX takes off, the hot ticket of the summer launches on the Nasdaq

The verdict is in, SpaceX’s  much anticipated IPO has been a roaring success. Demand for the shares has been huge, and the IPO has raised $75bn, the largest ever, valuing the company at $1.77 trillion, the seventh largest firm on  the US stock market. SpaceX starts trading on the Nasdaq on Friday, and it will be worth more than JP Morgan, Meta, Eli Lilly, Berkshire Hathaway and Tesla!

However, today comes the real test, when it will trade on the Nasdaq for the first time. Will the broader market be as enthusiastic about SpaceX?  After Thursday’s stock market rally the scene is set for a strong start, but any sign of weakness on the main US tech exchange could send shivers across financial markets.

SpaceX’s historic IPO will dominate the financial news flow today. Reports suggest that the allocation of shares to the retail market has been lower than originally reported at roughly 20% vs. 30% initially expected. This is still far higher than the usual allocation to the retail trading community and suggests that institutional demand far outstripped supply. This signals that everyone wants a slice of SpaceX right now, which could lead to more shares coming to market, should the underwriters exercise their right to sell additional shares in the coming weeks. Thus, SpaceX’s stock price could be the hot ticket of the summer.

Analysts are also bullish on the stock. At Oppenheimer, analysts are predicting the share price could rise to $190, from $135, as the company positions itself to be the biggest cloud/ AI computing company in the world. There is little skepticism towards SpaceX right now, however, while Thursday’s IPO was a historic event, the proof of whether SpaceX can maintain its bullish valuation will come in the future, particularly around earnings reports. SpaceX’s first earnings report is likely to be in September, and investors will want to know revenue growth, and also capex spend, to see how much cash the company is burning through to reach its AI ambitions.

Overall, a successful mega-cap IPO combined with a 5% decline in the oil price in the last 24 hours to below $90 per barrel on Friday, after Donald Trump announced that he had cancelled further strikes against Iran, is boosting sentiment towards financial markets. On Thursday, the Nasdaq jumped 3% along with the Russell 2000, while the S&P 500 rose by 1,7%. Tech led US stocks higher, and the US tech sector jumped by nearly 4%. Ahead today, futures in Europe are pointing higher, and indices in Asia also surged. Nasdaq futures are pointing to a slightly lower open, while S&P 500 futures are unchanged.

Excitement and anticipation around SpaceX’s IPO reflected well on overall risk sentiment on Thursday, and there could be more upside to come. Firstly, SpaceX’s share price could remain elevated since the IPO included a limited amount of stock, less than 5% of outstanding shares. Thus, the supply and demand imbalance may keep the stock price elevated. Added to this, algorithms are likely to be big buyers of Space  X in the coming days, and passive funds will need to buy the stock to balance their index exposures. This means that technical factors could support the stock price, at least in the short term.

The success of the SpaceX IPO reflects well on the entire AI trade, and chip and memory stocks led US indices higher on Thursday. SanDisk was the top performer, rising 14%, while Micron and Arm gained more than 11% each. If SpaceX is set to be the biggest AI company in the world, and run data centres in the earth’s orbit, then hardware like chips and memory will be in demand for the long term. For now, investors are focused on the success of SpaceX’s IPO and are not scrutinising the exceptionally bullish revenue forecasts. This scrutiny will come but today is not the day.

An historic IPO combined with Donald Trump’s claims that a deal to end the war with Iran is close to being finalised is enough to boost market sentiment into the end of the week. It is also helping traders look through the sharp rise in US producer prices, and the ECB rate hike from earlier on Thursday. Bonds rose sharply and yields plunged, as the oil price fell.

Elsewhere, UK GDP contracted in Apri. Growth fell 0.1% on a monthly basis, as the war in Iran started to bite. However, in the three months to April, UK GDP rose by a robust 0.7%, led by services. The declines in UK growth were led by industrial and manufacturing production, which have had to deal with a sharp rise in energy costs since the onset of the war. However, the sharp decline in the oil price over the last month, the price of Brent crude has fallen by 17%, means that the future looks brighter for the UK economy, although the next couple of months could keep growth on the back burner. We will need to wait a few months to see if a sustained drop in the price of energy, combined with the World Cup can help to boost UK growth into the summer months.

The pound is lower this morning and GBP/USD is just above $1.34, as the dollar makes a comeback and as the market digests the news about the UK economy.

Overall, SpaceX’s massive IPO and a sharp fall in the oil price is good news could help stocks to finish the week on a high note, and to top it all off the World Cup is started, which could make for a quiet Friday afternoon.