Musk’s SpaceX surges past $US2 trillion in Nasdaq debut
Manya Saini, Echo Wang and Niket Nishant |
SpaceX shares have jumped 19 per cent in their Nasdaq debut, sending the company’s value past $US2 trillion ($A2.8 trillion) to make it the sixth-biggest US company by value and turning Elon Musk into the world’s first trillionaire.
Investors jumped at the chance on Friday to get a piece of Musk’s sprawling empire spanning rockets, satellites and AI after the record-setting $US75 billion ($A106 billion) initial public offering.
More than 510 million shares worth about $US84 billion ($A119 billion) changed hands, even though SpaceX is currently unprofitable and generated only a fraction of the revenue brought in by similarly valued tech giants.
The launch was smoother than many observers expected, with trading kicking off late on Friday morning without the hiccups that had marred Facebook’s debut in 2012.
SpaceX shares ended the day at $US160.95 ($A228.36) a share to bring its value to $US2.1 trillion ($A3 trillion). The gain pushed SpaceX’s market value past Broadcom, with Amazon next in line at $US2.6 trillion ($A3.7 trillion).
Investors across the spectrum, from large institutions to retail fans of Musk, ended the day euphoric.
Analysts and portfolio managers said investors should brace for volatility, particularly early in SpaceX’s life as a public company, due to its small relative float and high valuation. SpaceX’s $US18.7 billion ($A26.5 billion) in revenue gives the company a price-to-revenue ratio of about 112, far above other megacap stocks.
Retail investors received about 20 per cent of the allocation, far more than the typical IPO, with some even celebrating an allocation of one share.
SpaceX executives, including President Gwynne Shotwell and Chief Financial Officer Bret Johnsen, celebrated at the Nasdaq market site in New York’s Times Square after ringing the opening bell on Friday. Musk held a separate event for employees in Texas.
The IPO is a culmination of Musk’s long-held ambitions in space and technology, and has stood out for rewriting Wall Street’s IPO playbook and drawing legions of retail investors into the market.
At $US75 billion ($A106 billion), the IPO’s proceeds were more than double those of Saudi Aramco’s record-setting 2019 IPO.
An estimated 4000 current or former SpaceX employees will become millionaires based on the value of their SpaceX shares, according to Hill.com.
Although SpaceX’s lack of profitability makes it ineligible to join the S&P 500, its expected fast-track inclusion in the Nasdaq 100 will soon make it a major holding for passive funds and ETFs that track the index, creating a fresh source of demand for its shares.
It will take about a month before SpaceX gets added to that index under Nasdaq’s new fast-entry rules, as opposed to a typical wait of as much as a year.
Some analysts expect SpaceX’s debut to trigger a reshuffling of investor portfolios, creating selling pressure on other technology heavyweights as funds rotate into the stock. On Friday, shares of other space firms and satellite companies declined sharply, with Planet Labs down nine per cent and EchoStar down 11 per cent.
SpaceX said its market opportunity spans $US28.5 trillion ($A40.4 trillion), a figure it called the largest in human history. With its leading position in space – the firm says its operation is responsible for more than four-fifths of the mass launched into orbit over the past three years – and revenues from Starlink, some investors said it has a strong foundation upon which to build.
Some analysts have already issued positive ratings on the company, but Morningstar analysts this month said it is more fairly valued at around $US780 billion ($A1.1 trillion), and CFRA on Friday started coverage with a sell rating.
“This is not a name you’re buying based on fundamentals. For me, the analogy is Amazon. This was a company that changed the way we live,” said Nancy Tengler, CEO and CIO of Laffer Tengler Investments.
with DPA
Reuters