r/stocks
Why SpaceX is not going to tank
Author argues SpaceX won't crash post-IPO since major investors will support the price to maintain high equity value for collateral loans.
- Major investors generate immense wealth from price inflation and have little incentive to dump shares.
- High public market liquidity allows investors to use equity as collateral for large loans with minimal discounting.
- With only a 5% float, it is easy for major stakeholders to buy and support the stock price above certain levels.
Lots of talk about SpaceX investors needing an exit capital and using the retail investors to cash out. Let me try to make a case for an alternative scenario.
First, these folks generate a lot of wealth from this price inflation. I bet they themselves won't believe how ridiculous the numbers have gotten and how much wealth they see in their bank accounts.
Second, they are in the business of getting loans against their equity using the equity as a collateral. For instance, there was the news yesterday that Softbank tried to use their OpenAI stake as collateral for a 6B loan (which they were gonna use to invest more into OpenAI but they ended up getting rejected by the lenders). This is harder to do if their equity is not traded in public markets. You cannot get big loans against equity that the lenders cannot cash out from. But if the stocks are in publicly traded markets, then that's another story. The equity would be considered highly liquid and would be subject to minimal discounting.
All they need to do is to keep the stock price high, which is easy on a 5% float. I wouldn't be surprised that the major investors don't support the stock heavily below a certain price. If I had a large enough stake, I wouldn't even mind buying some more from the IPO to keep the price high.
So yeah, there is definitely a lot of manipulation going on but I am not sure if things are as straightforward as we make it to be given the complexity of the financial options that are available these days. I highly doubt we will get instant gratification here and will be able to laugh at these foolish investors who all sits on lots of lots of billions thanks to their stake in the remaining 95% of SpaceX.
Companies go IPO because they need money, not because they have so much money that they want to share with you.
Here’s the thing though, the fact that investors want to cash out and the potential of the stocks going up is not mutually exclusive.
Your statement is true in general terms.
But in this specific case, SPCX could have gone public at $100b or $500b or $1t valuation. But they chose to squeeze all those gains for themselves and then come to the public market at much higher valuation, where it becomes more challenging to raise it from private markets. You as the small retail investor are taking on all the risk.
Did you know SPCX last fund raising was Series J in 2023 at $137b valuation? That's less than 1/10th of what you could be buying in at from the IPO. The "$1t" (or whatever it was) merger valuation with xAI was just fake made up numbers from companies largely owned by the same parties - it wasn't an inflow of capital.
SPCX is not growing at the rate of NVDA or MU and doesn't have the profits, but they're going to charge you a price as if it were. And then you're still hoping to make more money off that already inflated price. I won't say you can't make money still, because there is TSLA example. But I'll just say good luck.
I've made my money on the likes of AMZN MSFT MA V GOOGL NVDA AVGO based on actual financial performance and profits. I can sleep at night holding those rather than hoping an asset gets propped up more and more and more without same performance backing.
SpaceX was given a valuation of around $800 billion by private investors in December, so if it drops by 50% then it could be an okay buy given how Tesla has performed
Found the generational bag holder
The amount of the company being sold is irrelevant, if the stock is massively overvalued, it's massively overvalued no matter how much you buy. There is definitely a solid buying position on SpaceX, and I'll likely buy some in the future, but I doubt the IPO price is going to hold, never mind go up.
But, we're in an emotional market, who knows, I could be wrong, I'm just not willing to take that gamble.
I want to believe that is the case, but just look at Tesla. Other hype stocks like microstrategy that prints money out of nowhere.
oof.
It's just a 75 billion funding round with shitty terms for retail.
You're right that being public helps to secure loan but for different reason than you think - it's not because the stock is liquid but because pricing discovery is efficient. If you actually saw stocks traded 3 minutes ago at $1t valuation you know for a fact that this is what right now market values these shares
In the private markets though the whole "we've got $100b worth of stocks" is more like a pinky swear - yeah that's what someone paid for these stocks and they presumably did due diligence but will you find an alternative buyer who will value them in the same way? That's a big unknown. Tl;dr Public market is not about liquidity but about price discovery
the fact that SoftBank failed to secure that loan suggests that banks don't really believe in the price that private VCs "discovered" on these assets.
That is exactly my point. Equity in private companies -> bad collateral. Equity in publicly traded companies -> one of the best collaterals technically. You cannot borrow tens of billions against SpaceX equity if it stayed private. But you can print money if you have this much equity in a publicly traded company.
Well but it depends on how the whole price discovery goes. A private equity in spacex that has fairy tale private valuation might be better collateral than public equity in fairly valued spacex if that fairly valued is 3 times lower than fairy tale valued
But of course who am I kidding, the fairy tale private valuation will probably rocket after IPO anyway
I think the incentives the remaining 95% of the equity is creating is pretty dramatic. Imagine all the shareholders, sovereign funds, private equity that have multiple percentage plus equity and how much wealth they have generated through this. I think it's pretty easy to support the stock with such a small float if there is a selloff from a small group of investor base.
I think most of their business plan is already fake and there is no profitable business there other than starlink and sending cheap rockets to space.
What makes you think it's fake? They have been reaching most of their goals, and surpassing even Gov space agencies.
However long the bubble lasts. , which could be years, the bag holders will be the retailers. i m sorry its the law of nature, the law of the jungle.
The comments in here are the same loser anti AI comments that I filtrate everything.
It'll likely go up because it has support at all levels from billionaires to banks to retail. And because it's going to be another cult stock.
And Reddit crybabies will cry themselves to sleep over it.
Stock market might be starting a correction so if true it’ll effect them
A correction because it's up. Sure. Anything is possible but it has shown no real resistance at all.
Space Data Centers aren't a serious idea - it's the ketamine talking.
Because Elon is not an engineer and thinks physics works like a marvel cartoon his idea basically comes down to - space cold, data centers hot - put data center in space - I'm a genius (snorts another rail).
Yeah space really doesnt cool those data centers as well as people think it does.
Its basically just open air with little density. If you stuck it in water it would cool much more efficiently and faster. This is why 60 degree water will mess you up while a 60 degree day feels great.
Oh so that must make you good at aerospace engineering? Give me a break.
It tells me I have enough general engineering knowledge, and knowledge of how physics works to know when someone like Elon is talking out of his ass.
Wa wa just made 2k on spacex
Okay