SpaceX Bagholders Meet Gravity
Source: TradingView
SpaceX held its initial public offering seven weeks ago, on June 12 at $135 per share with the goal of raising $85 billion. In a frenzy, investors drove SPCX shares 65% higher to an intraday peak of $225 per share. Since then, SpaceX has fallen from orbit, plummeting nearly 50% from its June 14 high.
When a company goes public, it usually has to wait several months before it can join major stock market indices like the S&P 500 or the Nasdaq 100. This waiting period acts as a buffer, giving the stock time to settle and find its actual value.
SpaceX skipped that line and joined the Nasdaq 100 after just 15 days, triggering billions of SPCX share purchases by index investors.
The Insider Supply Shock
The decline deepened last week after SpaceX postponed a test launch of its Starship rocket and as investors await a flood of shares being freed from lockup restrictions in early August. Insiders are set to unload their stakes, putting more pressure on the share price.
According to Bloomberg, “SpaceX has set the stage for one of the largest share unlocks in history, with as much as $116 billion worth of stock becoming eligible for sale by insiders for the first time on August 6. That’s just the start with billions of shares unlocking by year-end.”
The SpaceX share unlock schedule spans 13 months, from this August to next September.
SpaceX and Tesla are still among the most valuable U.S. companies, valued at $1.5 trillion and $1.2 trillion, respectively. Investors continue to place a premium on Elon Musk’s leadership of the companies and his ambitious product roadmaps.
SPCX trades at a much higher price-to-sales valuation than Tesla (TSLA), which itself is trading at intergalactic levels. The Wall Street Journal reported: “Tesla doesn’t sell more cars than any other automaker. It isn’t more profitable than the competition, either. But investors continue to give it a market capitalization equal to the combined value of the next 37 largest automakers.”
Who's Left Holding the Bag?
The AI boom is being funded by investors—”bagholders,” in my view. The recent sell-off in SpaceX and the AI hyperscalers is just beginning. Debt, leverage and circular financing have inflated the bubble to unprecedented proportions.
The AI race has turned into a Ponzi finance scheme where businesses with no path to profitability are burning cash with no end in sight. Their shares are being sold to the public by Wall Street and the media in a hype cycle on par with the dot-com mania of the late ‘90s.
Wise investors understand that during times of market hysteria, it makes sense to diversify, invest in hard assets and maintain dry powder while waiting for the drunken escapades to end like they always do. If you’re an investor who doesn’t know or is concerned about what’s in your “bag,” never forget the golden rule of investing.
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Market Forces: A deeper dive...
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How a 24-year old collapsed a $45 billion hedge fund overnight betting on the AI dream of superintellegence.
OpenAI's ad revenue on pace to miss forecast by 90%, according to eMarketer and ADWEEK.
Tariffs are taxes. Economist Justin Wolfers discusses what the new taxes mean for the for the the broader economy.
The great Lacy Hunt sat down with Adam Taggart of Thoughtful Money last week to discuss the new era of deglobalization and rising prices.
Bloomberg reporters explain how a new proposal by banks and insurance companies could bail-out dodgy private credit funds.
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Off the beaten path...
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Attorney Larry Forman breaks down Tony Romo's July 23rd, botched DUI arrest.
Zlatan Ibrahimović takes a lie detector test to determine if he actually believes he is as great as he says he is.
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