Before you even think of investing in the SpaceX IPO (or open market stock purchase post IPO), please read the S1 very carefully. It is a remarkable document. A few things I picked up is that you can only purchase class A stock which provides you with 1 vote for corporate matters. You need never bother casting a vote because it has no value. Elon Musk will possess class B stock with 10 votes per share insuring that his whims can never be outvoted. No biggie? Who votes their shares anyway?
There’s more, lots more. SpaceX comes to market deeply in debt. Space X is burning money faster than the one profitable part of the company (Star Link) can generate profit. Every other aspect of the company is completely dependent on a lot of science fiction becoming reality (including recruiting one million people who actually want to colonize mars).
There’s other things like locating mineral rich asteroids and mining them and returning the refined products to earth at a profit. Or building an AI factory in space (“free” energy) and leasing compute to X-AIs chief competitors (Anthropic and Open AI). Selling (or renting SaaS style - I’m not sure) an AI code generator that X-AI’s engineers refuse to use because of its inferior functionality.
A lot of very questionable financial transactions. For example, SpaceX purchase hundreds of Tesla pickup trucks (because no one else was buying them) at full price, no volume discount. BTW, the number of trucks purchased by SpaceX exceeds the number of trucks reportedly sold to SpaceX by Tesla by close to 100 units. One of the board members has loaned SpaceX million of $$. Might he act in his best interest rather than the general stockholder’s? Oh, by the way, as noted above, Musk has sole authority to select the board members (remember that voting thing?).
There’s also a class C stock to which Musk will be entitled to gobs of shares should certain events transpire. Not to worry, it clearly says in the document that these events are unlikely to ever occur. The effect of that clause is such that if they were likely to come to pass, the full value would have to be expensed immediately upon going public. But, in that these events are declared as unlikely, they won’t have to be accounted for until they actually occur. So, what’s the point? Musk can still borrow against those shares as if they were real, tradeable stock.
No stockholder action can ever take legal action against SpaceX or Elon Musk personally - incorporation in Texas rather than Delaware has made virtually impossible to sue the company as a shareholder.
Those are just some highlights . . . there’s more.
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Having known a couple billionaires, they are very skilled at managing control of the companies they start. Usually they have difficult personalities and they quickly learn that they will get pushed around or pushed out. So they learn control. There is always a lot of pump and dump stock behavior around Elon’s companies. As such I have never owned TSLA. But I listen to Elon and find him a fascinating figure. And glad he is American due to all the technologies his companies have created.
We have got several giant IPOs coming this year. It is hard to tell where the money will come from and what will be the impact to our high flying Saul stocks. Will money get pulled from our stocks for SpaceX? Will they pull back? dunno
I can see no prudent way to publicly invest in SpaceX given the hype and expected valuation. But there is a halo effect to other rocket stocks mentioned on this board. And that is the other young space launch, payload, and services companies such as Rocket Lab, Intuitive Machines, and others. Myself I picked up a few shares of RKLB last month to ride the halo and am up 120% so far. I will bail out in the next 4 weeks sometime. I see their new Neutron rocket launch later this year as having likely various failures until the technology is perfected. Albeit this is why they keep delaying the first launch. Given the markets impetuous behavior around failures, RKLB will be a wild unpredictable ride for some time. What kills me is that I bought a big chunk of RKLB in late 2024 at $6/share simply because of the +90% growth rate and I loved their technology stack as an old aerospace guy. Within a few months I was up over 400% so I sold most of it for other stocks that I thought had room to run. sighhh well never look a gift horse in the mouth. I wished I had let my winners run as Saul always said.
If you want to invest in rocket stocks, probably best to wait a few months when the SpaceX hype diminishes and provides a better entry point. Or perhaps we discover a hidden gem somewhere in the space food chain.
-zane
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Well, millions of Buffett-followers and Bogle-followers and most people with 401Ks will be investing in Space-X even more than they’re invested in Tesla thanks to the new fast-track rules for adding newly listed companies to the indecies (Nasdaq 100 and S&P 500, etc.). Buffett made a public bet over a decade ago that the S&P 500 would beat any actively managed fund over the same time period, and I believe he won that bet (although that’s mostly due to funds being forced to buy and sell as their customers add or withdraw money at inopportune times, a story for a different board).
The masses are already invested in the biggest AI companies: Nvidia, Broadcom, Alphabet, Microsoft, etc thanks to their market cap weighting in the indecies. But, at least those companies have track records of profitability and steady management. It’s fair to point out the voting tiers - Alphabet adopted something similar. This is Elon learning from his TSLA “mistake.” Investing in TSLA or Space-X is primarily about investing in Elon and his judgement/actions.
The money for investing in Space-X via the indecies will mostly come from index rebalancing. Micron is now a $1T market cap company, but Space-X at $1.5T-$2.0T will be larger and the smaller companies will be proportionately less. Although I believe the new fast-track rules don’t force the bottom company(ies) to drop off the list, considering how small a percentage of the total they are that point is moot.
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