UPDATE: S&P 500 rejected fast tracking SpaceX into the index due to its strict requirements regarding profitability + track record (finally a small bit of sanity).
Early Friday morning (June 4th), I received the notice from E*TRADE regarding Monday’s (June 8) webinar invite for the SpaceX roadshow; an informational sell job that is used to drum up hype for new issues like SpaceX. E*TRADE is now owned by Morgan Stanley which is one of the co-lead underwriters for this IPO (Goldman Sachs is the actual lead underwriter).
As of this posting, I haven’t even completed reading 35% of the prospectus (I don’t have to read it all to give it any benefit of the doubt because the guy who is the CEO and chairman of the board, also will have majority control and has proven himself to be a fascist asshole that bears responsibility for the damage he caused to a large number of government institutions in the United States last year. What I do know is the criminals are in control of the levers of power where I won’t be surprised that this IPO goes sky high; I just want no part of this dirty process.
Normally, these roadshows are intended by the underwriters to determine demand, and to establish a price range (which is then presented in a conditional offering to see if retail IPO investors will bite at that range). Instead, the IPO was given a take it or leave it insane $135/share price highlighting the IDGAF nature that the market is now operating in. And as of Friday afternoon, the demand has exceeded the supply (which is exactly what the underwriters want to see because they are making a profit off of this and their motive is to make sure the IPO pops on its opening day).
This is going to make the insiders a lot of money relative to those that will be participating in this IPO from now (see below).
The last IPO I took part in was Facebook’s back in 2012 and that one flopped when the hype didn’t materialize on its opening day due to technical issues at the NASDAQ. It then took over a year for the stock to finally surpass its original offering range while eventually resulted in a fairly decent ROI after several years. Nonetheless, I later regretted ever investing in this company and have documented the reasons for that when I divested from the company back in 2020 (I ended up donating most of the capital gain proceeds from that sale).
Anyone who falls for this BS IPO at this stage of the game (with a economy and market that is no longer operating in any sort of reality, and a government in the U.S. that is now operating in the open as a criminal enterprise), should be willing to kiss away whatever money they do put into this; it’s one way the excessively wealthy will take your money from you (by selling their shares that were priced much lower, to suckers on the retail exchanges that will be trading at whatever it does end up pricing at before it pulls back from actual gravity).
The IPO lockup period is structured in a way that allows insiders to sell earlier (the standard in most IPO’s is a 180 day period where insiders and participants who are allocated IPO shares, are either restricted or highly discouraged from selling once it begins public trading). The information is noted in the “shares eligible for future sale” section (only Musk is restricted from divesting during the lockup period and came to an agreement with the underwriters to not sell during the first year). There is a staggered schedule outlined in this section of the prospectus starting on page 258.
For those who are non-affiliated retail investors that decide to participate in this IPO, the usual lockup provisions apply (brokerage firms that have been allocated IPO shares normally have clauses which while one could just ignore, could lead to the loss of privileges in being able to participate in any IPO’s in the future. Retail traders/investors that buy on the exchanges are of course free from any sort of restrictions. Like everything else, those who know people in high places are able to get away without any consequences if they choose to ignore that lockup period restriction. But I digress.
The vast majority of these shares (555,555,555) will be class A common stock (1 vote per share) whereas key insiders have access to the class B common stock which has 10 votes per share. As is usually the case, initial insider shares were allotted early on at what amounts to as “pennies on each dollar”. The stock options for Musk, Shotwell, and Johnsen are noted in the compensation section with their amounts and exercise price/respective dates. Johnsen has options priced at $4.40 which he can exercise in 2030 while Musk and Shotwell’s earliest options vesting is in 2031 which are priced at $8.40. As for the initial cost basis of those class A and B common stock, that has not been made public as far as I know.
Elon Musk controls most of these class B shares which would result in him having an 82.4% majority control of the company. Similar to how Tesla lacks an independent board of directors, SpaceX will similarly end up with a similar type of board composition because a person like Musk does not want to be held accountable for anything (Musk will be board chairman).
While reading through this prospectus, larger parts of this is pretty much to make all of these insiders filthy rich (pretty much true of most IPO’s). Additionally, Musk is seeking to become the first trillionaire (which is obsene considering the wealth inequality and suffering that exists in the world).
Come Monday’s webinar and sales pitch, I expect them to hype the high demand angle to drum up even more desire for the IPO. Remember though, a market is created when there is a buyer and seller, and their prices matches. In the past before computerized trading, an actual human (the market maker) would match the two. HFT (high frequency trading) which was implemented way before AI/machine learning, has changed the speed at which this process happens; it is even more supercharged now (in terms of this matchmaking ability).
Insiders who are allowed to sell post-IPO without being subjected to the lockup period, will make a sizable profit so long as there are suckers in the open retail market buying at whatever the final offering price ends up being (or higher) and trading at those levels on the opening day. That is where the pump and dump comes into play.
Yes, this is “out of touch with reality” because this initial price will end up putting the market cap of SpaceX at $1.8 trillion. The company is trying to justify this not based on its actual space exploration projects, but on the work they are doing on AI (already this sky high bubble that shows all of the signs of one that is ready to burst).
AI compute and AI data centers in space is what one of the main pitches are (imagine launched Starship hulls being used to house these data centers and using Starlink (with access to higher bandwidth spectrum) to beam that data to/from earth. The pitch is the cooling is handled by space itself and energy is supplied by solar. Prior to actual successful deployments, there will be all of that R&D expenses that will need to be recovered. Sorry, but I’m not buying what they are pitching.
Massive solar panels would be required to provide enough energy. And while space is cold, radiating that heat does not happen automagically. Additionally, components fail and need to be replaced which entails maintenance. Who is going to service that? Spacewalks take seasoned astronauts years of practice and experience (refer back to when the space shuttle existed and the training required for performing those maintenance on the Hubble Space Telescope). Any robotic solution to deal with this is added cost that would need to be figured out/engineered (the burn rate on spending = money pit which doesn’t solve the compute costs for AI.
Additionally, this disregard of the amount of stuff being launched into low earth orbit and the hazards they present to the space stations (ISS and the Chinese Tiangong) along with the deorbit of malfunctioning satellites (which includes Starlink) that have fortunately not rained debris onto a populated area yet, is resulting in this space pollution in both low and geo-stationary earth orbit (this is why these oligarchs do not want regulation of anything).
Musk mentioned plans to have over 100,000 Starlink satellites in orbit (newer versions that have more bandwidth which is going to required to handle the bandwidth needs of these more sophisticated AI designs including those robots he wants to build). Let that piece of LOGISTICS sink in; 100,000 low earth satellites that are still subjected to the laws of physics and gravity. This asshole is just moving the pollution we haven’t solved on the planet surface into space (where that stuff is going to end up raining back to earth where eventually a mishap will occur when not all of it burns up on reentry).
For the Musk fanboy/fangirl’s that grovel at his magnificence (sarcasm intended) on Twitter/X, they are part of the likely group of suckers who will ibe buying into this sham of an IPO. Brokerage firms like Fidelity are also in on this scheme for this IPO by lowering the usual account requirements that have long been used as just one small requirement in this risky world of IPO’s. Just $2,000 needs to be in a brokerage account (versus the usual $100,000-$500,000) along with the easing of the risk requirements (that one has to answer and submit before taking part in a conditional offer).
JP Morgan is also in on the pump by speaking to thousands of high net worth clients about this IPO. When some of the biggest names in the financial industry are willfully disregarding all of the red flags which they clearly see with regards to the AI bubble (all for the sake of greed), guess who will be the ones that will be forced (again) to bail out these “too big to fail” companies? <- this here being another big LIE when many of these companies and executives, should’ve have been left to fail and never be given an opportunity to keep perpetuating their protected incompetence at another company (a system the corporate executive class created for themselves). Yes, it will be the taxpaying public (because the criminals running the government will allows their Wall Street friends to escape accountability like they usually do).
Furthermore, various indices were willing to include SpaceX shortly after the company begins public trading (post-IPO). Inclusion in these indexes (like the S&P 500) means that various index funds would need to buy SpaceX as part of their portfolios. In simpler terms, this means that many managed funds including 401k’s, will automatically have percentages of SpaceX shares included. To be more blunt, the entirety of Wall Street is openly complicit in this charade where the “greater fool theory” will be in action (because it takes a buyer and seller to make a market and some greater fool has to be the one who buys this crap at those higher prices).
Caveat emptor (let the buyer beware) should be the mantra, but this being oversubscribed is what it is because the world and our financial markets has generally stopped operating rationally where something logical like true price discovery, doesn’t matter in this entire rigged process. Myself, I’m just going to continue my planned divestment from the market throughout this year while continuing to convert a portion of those gains into a physical asset like gold. As always, everything in the disclaimer applies with this post.
