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Last Call for the Hype Train
Elon Musk’s SpaceX is set to imminently go public at a valuation of $1.75 trillion, a number so unfathomably large that it basically defies logic.
Analysts have long argued that the math of the space launch-slash-orbital AI data center company simply isn’t adding up. According to recent estimates, SpaceX would have to increase sales by a whopping 50 percent every year for a decade to justify its valuation.
The more data we see about the blockbuster IPO, the harder it becomes to rationalize it. Investing in Musk’s rocket company is starting to feel less about trusting it to ever make money and more about signaling confidence in the billionaire’s vast ambitions to send humans to Mars or build out a one million satellites-strong AI data center in orbit. Others are likely looking to go along for the ride, hoping to get rich on the hype alone. That’s an inherently risky gambit, especially given the volatility of Musk’s other publicly traded company, Tesla.
As trial lawyer and online pundit Max Kennerly noted on social, SpaceX investors buying at the IPO’s $135 a share could be in for an extremely rocky ride. The company is going public at a valuation that’s roughly 95 times its trailing revenue. That’s compared to Google and Facebook, which launched at roughly seven and 20 times their valuation at the time of their IPO, respectively.
SpaceX’s initial public float, the portion of shares available to trade among retail investors, is extremely tiny, which has triggered concerns over major stock volatility. Put simply, with fewer available shares, even moderate buying or selling can trigger considerable price movements.
Retail investors could be left holding the bag after the initial surge in interest dies off, making SpaceX’s IPO resemble the launch of a dubious meme stock.
“For a mere $135/share, you get pro forma tangible book value of $7.85/share, an immediate 94 percent dilution,” Kennerly wrote, noting just how little actual value initial public shares will hold. “New investors are putting up 48 percent of all capital ever invested in SpaceX in exchange for 4.2 percent of the shares.”
Even SpaceX warned that the value of its shares could be diluted significantly in its Securities and Exchange Commission filing last month.
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