SpaceX’s Record-Breaking Wall Street Debut

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1:46Bloomberg Audio Studios. Podcasts, radio, news. We have an opening trade. Shares open for SpaceX. The Nasdaq crowd goes wild. SpaceX debuted on the Nasdaq this morning after the largest IPO in history. There are always problems on Earth. There are always things that we wish to be better, that we want to solve here on Earth. And we should solve them. But there also have to be things that get you excited about the future. That make you glad to wake up in the morning. Because you can't wait to see what happens next. And that's the future that SpaceX wants to bring to you. Trading started at$150 a share.

2:29That's made thousands of current and former SpaceX employees very wealthy, but none more so than Elon Musk himself. It's made him the world's first trillionaire. The market has finally delivered its first verdict on SpaceX. So now the focus will be whether those gains can hold as trading gets underway. In the coming days, more than a dozen ETFs tied to SpaceX are expected to launch, and SpaceX option contracts will start trading on Tuesday. SpaceX successfully made the case to investors that they should buy into Musk's vision, that the company will put data centers in space and transport people to the moon and to Mars.

3:08But it's unclear when or even if SpaceX will deliver on that.

3:18I'm David Gura, and this is The Big Take from Bloomberg News. Today on the show, I sit down with Ed Ludlow, the host of Bloomberg Tech, to talk about what SpaceX's record-breaking IPO means for financial markets, for Elon Musk, and for other companies poised to go public.

3:40This is a huge IPO. There has been no shortage of and continues to be no shortage of superlatives to describe it. Walk us through a few of them. How big a deal is this? Well, literally the biggest deal in history. But like the way to think about it is, well, why would SpaceX need to raise$75 billion? SpaceX needs money to buy GPUs and to build satellites that are data centers for space. Money lets them do that more quickly. And they plan to grow from this place where they're like doing really well as a rocket company with very successful satellite constellation based internet to out of this world.

4:16You know, something that's so far-fetched and distant and, you know, money helps. That's simple as that. How should we think about this company or how do you describe it so it's not just a company that shoots rockets into space? SpaceX has a vision where in the end, most of the money it makes will be from selling AI software to companies big and small around planet Earth and potentially beyond planet Earth. Clearly, there's a series of steps. So in the first instance, they dominate the market of launching rockets with something on them into orbit. And that can be for a government or it can be for a private company.

4:51They have this cash cow Starlink, which is basically for you and I, like on planet Earth, it's Wi-Fi that works really well. It just happens to come from a satellite instead of coming from cables in the ground. And the next phase of that is to build data centers that are in a satellite form factor to run AI models inference around Earth. So you take all of those things I just talked about. The opportunity is twenty eight point five trillion dollars is calculated by SpaceX. And you just say, I either do or don't accept that all of that economy happens on Earth in orbit around Earth and eventually on the moon and on Mars.

5:30Yeah. Break down the level of emotion surrounding this IPO. Yes, it has to do with the size of the numbers, but they're hoping to raise the valuation. But there's also just so much emotion here as well. Yeah, I mean, IPOs are an opportunity to get access to a company, but also to a person. So for lots of people in markets, you know, they want to be able to buy a piece of Elon Musk. You know, he's still regarded as the visionary, as the, you know, real life Tony Stark. Shout out to all my Marvel fans. For the venture capital firms and the private growth equity firms that have backed SpaceX for a long time, this will be the biggest payday for them in their firm's histories.

6:08Simple as that. And the kind of third bucket of it is the retail investor. Like, it will be in the history books. It will be in the textbooks. Looking back, you know, it's when all the math is done, retail investors will probably account for like more money in this IPO than say Alibaba raised in its entire IPO. SpaceX started trading today. It's going to take some time before we're able to say, was it a success? Was it a failure? Was it a disappointment? What does success look like for this company in the context of this public offering? We always start with this caveat that Elon Musk is often wrong on the timelines that he presents.

6:47And I would say very involved investors of this company will willingly say that to me. You know, like we accept that. He will say this will happen and I think it will happen by this date. Often it doesn't, but it does happen in the end. So they have full conviction he'll get there, just not in the linear fashion that he outlines. lines. Success in the first instance is getting this starship system. It is the most powerful launch system on paper that man has ever created to be fully reusable. Everything, be that data centers in space, humans living and working on Mars, an economy on the moon is predicated on this rocket's ability to carry payload 100, 150 metric tons to orbit and beyond.

7:37That doesn't happen yet and to be fully reusable because otherwise the economics just don't make sense starship has only ever done 12 test flights and no part of it the booster nor the starship spacecraft that tops ever successfully both relanded on earth and been reused so it's like wow we've got some way to go here guys how does this giant ipo change the way that we look at companies or look at Wall Street. With SpaceX, we've just focused endlessly on the idea that this will be the biggest IPO, initial public offering in history, that an idea that this company that was such a huge entity as a private company can pull off this mechanism.

8:21But really, it's about a company's ability to access capital. And that is not exclusive to private companies going public. So irrespective of whether you're going public or you're doing an equity offering or you're looking at the debt markets, this is the level of capital that Wall Street is comfortable with. And not just Wall Street, like this is happening around the world. And that has changed the scale, the economics of what is or is not a good return on equity. After the break, what Tesla's trajectory could reveal about SpaceX and what this deal means for Anthropic and OpenAI as they prepare to go public.

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11:36The prelude to an IPO is this roadshow where the company makes its case with banks. Well, traditionally. Yes, to investors. Didn't even seem necessary. or Bloomberg reporting. Folks are saying it's four times over subscribed. What was that roadshow like leading up to the first day of trading, the pricing of the first day of trading? So traditionally, you don't just set a price and say, we're sticking with it. There's a range. There's a range and it's marketing. You go out to all of the potential investors, the pool of potential investors and say, how are you guys feeling about this? But my understanding is that basically Musk wanted to take the leverage away from the big institutional investors and said, I am going to set this price.

12:15That way, it doesn't matter how much deployable capital you've got. I can just select who I want to get access to this IPO. So that's unusual. To pick up on what you just said, who is getting access to these shares? Elon Musk had a plan for that. Who ends up getting access? It's existing investors. And, you know, Musk has been all about loyalty. You know, how SpaceX has managed it is they don't use intermediaries. Musk or the CFO phone you, you know, and say, like, do you want to participate in this? These are people that they like. So that's a big part of it. You know, the big long only asset managers based on my reporting, like Musk and the SpaceX team really wanted to bring people in that they believe would hold the stock for a really long time.

13:00Tesla, his other publicly traded company that he's CEO of, has a very big and loyal retail shareholder base. And a lot of them really believe that they would get sort of preferential access here. And so it'd be interesting to see how those loyal Musk followers feel in the end, how they respond if they didn't get access to the SpaceX IPO. You bring up Tesla, and I'm curious what we can learn from that company's trajectory that might be applicable here. So it was a company that was private, relied on the devotedness of many Musk fans for a very long time. He promised it was going to be something that, in fact, it's largely turned out to be.

13:40How applicable is that? That Tesla story of what we're going to see with SpaceX here going forward. You know, I think a lot of very sophisticated people in technology and those that are investors in Elon Musk companies have cautioned against, at least cautioned me privately in trying to say that SpaceX will follow the same story. Not a perfect parallel. Check the tape. The issue is that Tesla at that time was a sort of standalone committed party to a very nascent industry and went on to dominate it. but you can't apply those same principles to SpaceX. Indeed, like SpaceX is telling the world in the end, we think the market we're going after is$28 trillion, but only$2 trillion of that is our existing launch business and our Starlink business.

14:26So$26.5 trillion doesn't exist yet, it's new. So modeling for that is, I mean, how do you do that? It's science fiction to a lot of people. It's like, you know, reading the SpaceX prospectus is like reading a Christopher Nolan and scripts, right? Like for some sci-fi. And so very succinctly to answer your question, a lot of people will say the jump that Tesla made from plucky battery electric carmaker to humanoid robotics and robotaxi, it's very hard to see SpaceX following that path. Retail investors are going to have exposure to SpaceX through index funds. It's going to be a part of the NASDAQ 100.

15:01Walk us through why that's so significant. It usually doesn't happen as quickly as it's happening now. So in very simple layman's terms, the NASDAQ 100 is a bucket of sort of the biggest technology companies, but they adjusted or amended their rules to fast track inclusion. The S &P 500, which is the benchmark equities index, which we all follow, but also many money managers just track and follow, did not do that. Either way, because SpaceX will become a part of those specific indices, there will be all kinds of funds that need to rebalance passive funds, and that will have an impact on financial markets.

15:40There has been some skepticism about SpaceX's valuation. Can you walk us through what the bear case here is, why some investors think it's way larger than it should be? It's trading at a multiple that is 100 times sales. And if you look at recent history of technology ipos that is a pretty pretty premium even over some of the sort of more out there listings that we've had and again the worry is like the goals this company have outlined are very out there and they require immense spending and a lot of people find it very hard to see a world where one million satellites that are data centers based get built deployed and start running AI models, it's an idea.

16:30Hasn't ever happened before. You know, there are some startups up there that have a very limited, like there's one satellite in orbit right now that's running an NVIDIA H100. And so like, you know, people are bracing that the valuation comes down. Now, what I would say, Elon Musk was pushing maybe for a higher valuation. I think people did make an effort to kind of find a middle ground where the valuation made sense. I had this IPO. Now our focus shifts to the next big one. So it's OpenAI and Anthropic. Yeah. Why is all of this happening now? Why is the environment for these IPOs so ripe? So what the leaders of Anthropic and OpenAI have said in the very limited ability that they have to speak now that the confidential filings are in is that going public is the only mechanism to get the level of capital that they need.

17:18What's amazing about that statement that I've paraphrased from several different individuals is the private markets have been incredibly willing so you know just before anthropic filed confidentiality to go public they raised 65 billion dollars in a private market round that valued them at 965 billion months after they'd done their previous round of 35 billion so like it is confusing to understand like you guys are saying that the public markets are the only way but they know that all of the the giants out there your alphabets, the parent of Google, Amazon, Meta, they are looking at all of the breadth of the capital markets to get money.

17:58I want to ask you about FOMO or potential FOMO here. Do institutional investors feel like they have to invest in a company like SpaceX, just the level of enthusiasm and yes, optimism in many quarters is such that they have to do it, they can't decline to do so? Yeah. What the existing investors on the cap table did tell me is like you are making an investment based on a person, Elon Musk. You are making a conviction call with the intention of holding the stock for a long period of time beyond a lockup period. You know, it's not a sort of get rich quick play. The market structure does not allow you to do that.

18:39And whether you are a long only asset manager or you are sovereign wealth fund, you know, People do look at Elon Musk's track record. They look at what happened with Tesla. And that's where it's analogous. They think he's capable of delivering growth and therefore returns to shareholders.

19:03This is The Big Take from Bloomberg News. I'm David Gurra. The show is hosted by me, Sarah Holder, and Juan Ha. The show is made by Aaron Edwards, David Fox, Jeff Grocott, Patty Hirsch, Rachel Lewis-Kriske, Emma Munger, Laura Newcomb, Naomi Ng, Julia Press, Tracy Samuelson, Naomi Chavin, Alex Tagura, Julia Weaver, Yang Yang, and Taka Yasuzawa. Our executive producer is Nicole Beamsterbor. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. Thanks for listening. We'll be back on Monday.

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