Key insights
- SpaceX's upcoming IPO is viewed as potentially disruptive to the market due to its high valuation (100x revenues) and the supply of shares needing to be absorbed by investors. While the analyst doesn't foresee it significantly impacting the 'Magnificent Seven' tech stocks, which are seen as quality safe havens, the IPO introduces risk to the broader market tape. The strategy to include passive index bids and the potential involvement of retail investors are noted as factors contributing to this risk.
How disruptive will SpaceX's (SPAX.PVT) IPO this Friday, June 12, be to AI trade and Magnificent Seven tech stocks?
JonesTrading chief market strategist Michael O'Rourke shares his thoughts.
SpaceX is expected to go public on the Nasdaq this week under the ticker SPCX, with the space operator aiming for an IPO price of $135 per share.
How disruptive do you think the SpaceX IPO will be to that Mag 7 trade?
I'm not sure it's going to be so disruptive. I I do think it's disruptive to the market in the sense you have a supply that has to be digested by investors.
Uh, the valuation as we talked about is absurd, 100 times revenues. Um, it's pretty dangerous. That's the reason Elon wanted the index passive bid in there to support the stock through the unlock.
Um, so yeah, I think there's risk to the tape because of that. Um, but the Mad 7 names for the most part, the majority of them are high quality names, and I think that's where investors will go to hide if you see market weakness.
Mike, who is going to absorb all of these new shares coming to market?
(laughs) Well, right now they're trying to push them off on retail. Like I said, they tried to push them off on the passive indexes.
Good for S&P for, you know, sticking to its its uh its criteria for for, you know, for new entries that you have to have that profitability.
But like I said, it's it's it's really absurd when you're coming public with at 100 times revenues. This is supposed to be, you know, stocks are these are supposed to be investments in companies that that earn profits.
And that profitability is a long way out, a long ways out.
You know, in talking to a lot of folks, uh Michael, in the lead up to this SpaceX, you know, the general view is that because the retail investor is going to get involved, there's going to be a lot more volatility in SpaceX.
Uh I don't necessarily subscribe to that. I think the retail investor has changed. I think they're more savvy than ever they before. I see what they're searching for on our site.
They are they have I guess the most information at their disposal that they have ever had before. What do you think about the retail investor involvement with this?
Oh, I agree with your assessment. They are sharper than they've ever been and they have more tools than they've ever had.
Uh, so I I think that you you know, one of the interesting things here with SpaceX, whether you're an institutional investor or a retail investor, if you wanted exposure to this company, you already have it.
Like you could have bought it through the closed-end funds, you you could you could have played it through Echostar. There's so many different ways.
And that's the scary thing here is that anyone who wanted to be in SpaceX has been there already and likely for years now.