Interview
What SpaceX, OpenAI and Anthropic's IPOs mean for investors | The Economist
- SpaceX, OpenAI, and Anthropic are preparing simultaneous "giga IPOs" that could collectively add up to $4 trillion to the US stock market's total value.
- SpaceX plans to raise approximately $75 billion in its initial public offering, targeting a post-IPO valuation of $1.75 trillion.
- Three primary drivers are fueling these listings: the need for massive capital investment, pressure from employees and early investors seeking liquidity, and a strategic decision to capitalize on current AI-driven market euphoria.
- Index providers are fast-tracking the inclusion of these firms in major benchmarks like the S&P 500, potentially within five days of listing.
- Concerns exist that index-tracking funds will be forced to purchase shares at inflated, volatile prices, potentially exhausting the immediate pool of buyers and causing subsequent price declines.
- Analysts argue that while the sheer size of these IPOs is massive, their individual market weights will remain small (e.g., SpaceX would constitute roughly 0.1% of the S&P 500 initially), making the absolute size less of a systemic risk than the rapid entry speed.
- Historical data from University of Florida academic Jay Ritter indicates that, on average, IPO stocks underperform the broader market by approximately 20 percentage points over the three years following their listing.
- Underperformance is statistically more severe for firms with high valuations relative to revenue, a category in which SpaceX falls given its price-to-sales multiple of 90.
- Experts suggest the current timing indicates companies and bankers believe they are approaching the peak of the bull market, posing a risk for retail buyers who may enter just prior to a downturn.
- A structural shift is occurring where successful tech firms are staying private longer and requiring significantly more capital rather than returning cash to shareholders via buybacks.
- Tech giants are increasingly issuing bonds and follow-on shares to absorb capital, potentially reversing the capital flows that previously buoyed stock market prices.
- Justifying SpaceX's $1.75 trillion valuation requires "gargantuan" future growth, relying on speculative revenue streams such as space-based data centers, compute sales to Earth, and Mars colonization.
- If the current AI hype cycle subsides, the market faces potential volatility as the gap between current asset prices and traditional earnings fundamentals narrows.