Been thinking about the upcoming SpaceX IPO and wanted to share my thoughts.
Like most people, I always thought of SpaceX as just a rocket company. However, after spending time-looking into the upcoming June 12 IPO, it is actually a mashup of three companies: SpaceX, xAI, and X (formerly Twitter).
When you look at the actual math, it says a lot about the true revenue maker. Starlink is completely carrying this entire company. It brought in 61% of all sales last year, and that jumped to nearly 70% in the first quarter of this year. So if you buy this IPO, you are mostly just buying a satellite internet provider (a seriously good product they have built I may add). The problem is that Wall Street is pricing the company at a ridiculous $1.77 trillion by pretending it is an AI giant. Meanwhile, the actual AI and social media side of the business is bleeding cash. Before Elon smashed these companies together, SpaceX was making a healthy profit. Now, because Starlink's cash is being drained to pay for AI data centers and rocket R&D, the company lost a staggering $4.28 billion in just the first three months of this year.
NOW, this is where it gets interesting or some would say suspicious. Nasdaq recently changed its rules to give giant companies a "fast pass." Because SpaceX is valued so high, it will get fast-tracked directly into the Nasdaq-100 index after just 15 business days, around July 7. The exact day that happens, popular tech ETFs like QQQ are legally forced to buy the stock. They CANNOT look at the massive losses and say no. They have to buy it, I repeat they HAVE to buy it. Even worse, SpaceX is only letting the public buy a tiny fraction (about 3% to 5%) of its total shares. Flooding billions of dollars of ETF money into such a tiny pool of shares will artificially spike the stock price. This creates the best setup for insiders. This setup forces retirement accounts to buy at a hyped-up price, right as early investors are allowed to cash out. Independent experts at Morningstar have already warned that SpaceX's true value is closer to $780 billion, which is less than half of the IPO price.
Index funds are diverse, they are still an amazing instrument, but we must be wary and a little cautious when we see things like this happen.
My 2 cents.
