It could fly or flop. Here’s why it doesn’t matter
+ How Wall Street is misleading us
Written by a human (me), not Ai
SpaceX starts trading today. It will be the biggest IPO in history, raising $75 billion and valuing the company at $1.8 trillion.
To put that into perspective, SpaceX will be worth more than the top 10 companies in the UK, combined.
Everyone’s talking about SpaceX and Wall Street has successfully created massive hype over it.
Investors were almost being begged to get their orders in, particularly in the US by investment banks, brokers and platforms.
The headlines and scarcity tactics are in full force with ‘oversubscribed‘ and ‘don’t miss out‘ messaging that follows Wall Street’s marketing playbook.
Below, I’ll explain why ‘oversubscribed’ is a marketing trick. Plus I’ll tell you why I’m not buying SpaceX.
The Wall Street Fee Machine …
My professional investment experience tells me this is massive hype and (loud) noise. All manufactured by Wall Street’s professional fund-raising machine!
The financial industry doesn’t profit from your set-and-forget diversified portfolio. It makes money when you trade, chase, and react.
IPOs are the ultimate fee machine. Investment banks like Goldman Sachs are making $100s of millions in arranging this deal (and so creating the hype).
The investment banks get paid regardless …
Goldman is estimated to earn a total of $500m from the SpaceX IPO (including fees + post-IPO trading commissions). Now you see the need for enormous hype!
And regardless of whether the stock goes up or not, the banks, brokers and platforms will get paid anyway.
Oversubscribed?
Here’s why ‘oversubscribed’ might be misleading. We are told SpaceX is “oversubscribed” by 4-5x which supposedly demonstrates high demand.
In my fund management days, a genuinely hot IPO was 10-20x oversubscribed. When we really wanted a new issue, we would inflate our orderby up to 10x, knowing we’d get scaled back in the final allocations.
High profile IPOs have ranged from 5x for Meta (Facebook) in 2012, 12x for Arm Holdings in 2023, 17x for Alibaba in 2014 and 120x for Snowflake in 2020.
Facebook (5x) declined by 21% in its first week.
SpaceX might flop or it might fly. Below are factors for each outcome. And why i’m not participating …
Will SpaceX fly or flop?
On the one hand, it looks overvalued. SpaceX is loss-making and isn’t expected to make profits until 2031. So there’s no P/E ratio.
On a Price to Sales valuation, SpaceX is valued at 70x forward revenues. For reference, the big tech stocks range from 3x for Amazon to 25x for Nvidia. At its peak, Nvidia reached 45x.
Finally, as recently as December, SpaceX was being valued at $800bn via private deals. Six months later that valuation has more than doubled to $1.8tn !
So, i’m out. I did not buy into this IPO due to valuation and uncertainty.
BUT .. Wall Street needs this to go well. Goldman & co have an incentive to make this a success. Why? To improve their chances of securing the lead for the next IPO deal (Anthropic, OpenAi etc).
So there’s bound to be some management and manipulation in today’s trading.
No need for FOMO: Why it makes no difference ..
If you went in for SpaceX or not. Whether it goes up or not …
No need for FOMO because the success of SpaceX or otherwise will make very little difference to your financial security or wellbeing.
Here’s what REALLY moves the needle ..
The boring stuff. The stuff that doesn’t make headlines, or hype, or makes Goldman Sachs $500m …
Just a balanced, diversified portfolio. With Low fees. Minimised tax leakages. Protecting against inflation. Pound-cost averaging. Capturing long-term growth and near-term income.
It’s not flashy like a shiny-new-penny IPO but it builds and compounds financial security for life. With certainty.
And even if SpaceX doubles on day-one, i’ll be perfectly happy to miss out.
Why? Because if that happens, it will demonstrate the market’s ability to absorb a mega-IPO with a huge valuation. And so my diversified funds will also gain nicely on the day (+ they will own some soon).
Main point:no need to FOMO over SpaceX !
The FAR bigger FOMO is not having a properly balanced leak-free portfolio for a lifetime of financial security.
For a brief chat on how we can help you build a properly balanced passive portfolio, book a call with me here.Ps
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About Me
Manish Kataria is a Fund Manager. A CFA-qualified professional with 18 years’ experience in investment management and UK property. He has managed investment portfolios for JPMorgan and other blue chip investment houses. Asset classes managed include Equities, ETFs, Bonds, Funds and Options. Within property, he invests in and owns a range of assets including developments, HMOs, BTLs and serviced accommodation. InvestLikeAPro was set up so anyone can invest like a pro.
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