SpaceX Jumps in First Trades Following Record $75 Billion IPO

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2:01We've got this in trading. It's now trading. It priced at 135, opened at 150, here at 156. Anthony Hughes, Bloomberg U.S. equity capital markets reporter. What do you think here, Anthony? Well, I think, you know, 11 % gain on the first trade is probably a number that would, for most IPOs, would be considered, you know, what you would hope to achieve. But, you know, in the sense that this IPO, there's a lot of hype and enthusiasm and a lot of people involved in this deal. I think maybe people were hoping for a bigger number. I really like the fact that you started there because the headlines were crossing as of the first 30 minutes of trade.

2:41And the initial headline was that it was indicated to open at$175 a piece. And it's been steadily going down. We've gotten headlines about, you know, oh, now it's$174, now it's$172, now it's$170, all the way down to$150. Is that a bad sign? Yeah, well, just to understand the process a bit better. I mean, Morgan Stanley is a stabilisation agent for the IPO, and they also have the role of opening the IPO. But basically that process involves bringing together all these buyers and sellers for this opening print, and you want to make sure that the opening print is sort of ideally as fair a price as you can get.

3:17And generally speaking, from what I'm told, that banks like to have about 10 % of the deal size traded in that opening print. So I think you can see the number there was around 60 million shares. and, you know, the IPO was 500. So, you know, about 10 % of the stock basically went through in the opening print. That's about standard, right? But that allows the banks to be sort of confident, I guess, that, you know, taking the buyers and the sellers together, the price that you're opening the stock at is, you know, the price that the market wants to pay. And then, you know, looking at the success of this first day trading, one measure of it will be, like, where the stock closed.

3:52And you want the stock to close near to or ideally above where it opens. You don't want it to like you want to open the stock really high and then it ended a lower because that meant that would mean that a lot of people lost money. So, you know, that's the art of opening an IPO. But this is just all one day's trading and many days ahead. Yeah, exactly. Right. We got close to 100 million shares trading hands here again, about$159,$160 a share, open at$150 after pricing at$135 here. How long typically will we see, I guess, higher than usual volume when a company goes public? Does that all get kind of exercised the first day?

4:30Does it last a few days? Yeah, I think from my experience, the first day will be the heaviest day for a while. I mean, the first few days will also be relatively heavy. I mean, SpaceX, you know, the interesting thing with IPOs is that, you know, the art of executing IPOs is to try and place the stock with as many long-term investors as you can and investors that won't sell. But there's always a portion of the stock you want to get to people who are traders because obviously we want some stock to be in the market for people to buy and sell and not to sort of overly exaggerate the price if there's a real supply and demand imbalance.

5:02But, you know, I think from the institutional book they allocated like 70%, I think it was 70 % of the deal to what they call long-only investors or people who are not traders. but you are going to have an element of the, as you know from your experience, you're going to have an element of the book that's got to go to people who are a bit more short-term. But, yeah, the first day will probably be the biggest day of trading. I mean, it may be different for SpaceX but, yeah, I mean, when you go and see SpaceX do another, maybe they'll do another stock sale in the future or some sort of corporate event, there might be a day when it's higher but this could be, you know, it could be the highest day of trading for the stock.

5:42It's interesting. I'm just looking at the rich go function on the Bloomberg terminal. Had Elon's stake in SpaceX valued at$135 a share, which placed him, again, farther away, the number one richest person on the planet with a net worth of$970 billion. Now with the rise in the price, he's well over a trillionaire. So there you go. That's also kind of an interesting event there in the world's history, I guess. Yeah, on paper, of course. On paper, of course, exactly right. This has to be, I'm going to call, let's just, if we kind of trade like this today, you know, you call this a successful IPO and a successful historic IPO for many reasons, not the least of which is the dollars involved.

6:27That bodes well, I would think, for the anthropics of the world, the open AIs of the world, which have also filed registration statements to go public. This has got to be a good sign. Well, I think we'll see how the stock trades today. I mean, to be honest, coming out 11 % out of the gate, you probably might be a little worried that it could drift back and maybe end not as well. But, you know, I think the banks have put a lot of work into this. So, you know, maybe they know that they can get it to finish around where it's opened here or maybe there's some more enthusiasm for the rest of the day.

6:58But, yeah, I think it shows you that$75 billion is – I mean, we've reported this as a huge number. It's a record deal. But, you know, I think even the senior person there at Goldman Sachs today, I saw them note and something I've been thinking a lot about is that, you know, the numbers we talk about these days are so much larger than even a few years ago. We talk about trillions just offhand. And, you know, the amount of volume you see in the IPO market, we're talking, you know, I think we're thinking globally maybe$300 billion, you know, something like that if all these deals happen. And, like, that's a lot of money to raise.

7:31And their market cap's obviously much bigger than the trillions. But the amount of money that they're sucking out of the market is a relatively small amount of, you know, well below 1%. You know, it's like I think the number was something like 20 basis points or something. It's not that much money these days. What do we know about the lockup period here? Typically, an IPO lockup is 180 days, six months before insiders can sell their shares. What do we know about this transaction? Yeah, so it's a bit of a long answer to that question. It is a non-traditional lockup. Normally, you have a six-month lockup and everyone comes out and can trade at six months and the stock falls as a result.

8:04But here, you've got to take into account this is a 24-year-old company. So it's not like it had already had a fairly developed shareholder base. So there's a logical argument that you can maybe not have the standard lockup. But they still have put some standards around it by making sure that the company's going to have to report its first set of earnings before people start to get out. But even then, there'll be a small proportion of the people who will be able to sell and then a little bit later, a bit more. And the whole lockup sort of basically comes off over a one-year period. And Elon Musk himself is locked up for a year or so.

8:46And he probably wouldn't be selling, I don't think, in any substantial size in any case. But, you know, the point is, I guess, that he's got a lot of pre-IPO investors alongside him there. And there are some, there are definitely some of those investors who aren't investing in the IPO and do want to get out because they only invest in private companies. There are other investors who are continuing. So, you know, there's all different types of investors involved in an IPO like this. And some of them are going to want to sell and some of them are going to hang on. And it's just going to be a bit of a different, bit different.

9:16But the lockup structure is quite complex. It stretches over a year. There are multiple, multiple, I think it's 8 to 10, might even be more periods when a little bit of stock comes out, like 7 % here, 8 % here. And, you know, it's all outlined in the prospectus, but it's quite lengthy and well considered. So how about the retail component? Do we know generally how much kind of went through the retail? Yeah, so I think if we look at the IPO, it's like 75 plus the green shoe, which will be exercised because the stocks traded up will likely be exercised. I think our understanding was that 20 % of the deal went to retail, so that would be a little bit less than$20 billion.

9:54The demand was more than$100 billion. Wow. When you talk about retail, there's different types of retail. There's the rich, high-net-worth customers of the banks, and then there's the Robinhood. There's the whole spectrum. There's the Robinhood customers. I mean, if you talk about the Robinhood customers from all the – what people have said this morning, It sounds like all hundreds of thousands of Robinhood customers got at least a share. And that was the case probably with some of the other digital platforms as well. But a lot of people are disappointed because they only got one share. But maybe now they look at and see 10 % gain.

10:26Maybe they're not so disappointed. I don't know. Looking at just Tesla, stocks down 2 % here today, down 13 % for the year, up 22 % for a trailing 12-month basis here. And of course, one of the storylines out there, Anthony, is that Elon's just for no other reason just for keeping everything neat and tidy just kind of have SpaceX acquire or roll up Tesla into SpaceX I know that was discussed out there in marketplace do we expect to hear anything from the company on that um well it's unclear I think that's something that people are expecting to happen it might have some industrial logic I think particularly because there's different things that pretty you know big ambitions that Tesla has around robotics which makes might make more sense in a in a business like SpaceX with a business like SpaceX where there's so many of these big, big, big projects and ambitions that they're trying to pursue.

11:16And, you know, maybe robotics and space together makes a lot of sense. And, you know, but I think it might be a while before we hear about that. I mean, I think people do expect that to happen. But, you know, it has to make sense for, you know, based on, you know, how these stocks are trading and whatever. But I think the main argument perhaps for that happening from, I guess, a more, I could say from a more cynical perspective is that it would allow Elon Musk to, you know, to potentially take control of this bigger entity because Tesla doesn't have the dual class structure and SpaceX does. But, you know, I think a deal like that would take a while.

11:58I think the other extraordinary thing about SpaceX, though, is that we've really seen that Elon Musk gets stuff done quickly and quicker than everyone else. I mean, even the press releases, the filings, the roadshow, the way the S1 was drafted and filed, everything happened a lot quicker than the average company, that's for sure. Stay with us. More from Bloomberg Intelligence coming up after this. At Brookfield, you can own wealth that's measured in generations. For 125 years, we've built long-term wealth through expertise, discipline, and a clear vision for the future. providing investors access to alternative strategies built for what's next.

12:37Brookfield. Own what's next. Learn more at brookfield.com. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business.

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13:51Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's go to George Ferguson here. He's been tasked to lead the research efforts here involving lots of the analysts at Bloomberg Intelligence because this is a technology play. It's an AI play. It's a rocket ship play. You got to have some experts. And fortunately, Bloomberg does for all of those businesses. George, what do you think the buyer of a SpaceX, what do you think the buyer of a SpaceX share? What is he or she thinking here when they place that order?

14:30Yeah, I mean, I honestly think most of them are believers in Elon Musk, believers in his vision of the future and his ability to get things done, because I think you've got to be a big believer to buy in it at these valuations. So that's why I think you saw so much of the IPO get shunted into the retail side of the world, because I think that's where you'll see a lot of support and buy into that vision. It feels like the SpaceX IPO is a real beast. I mean, you look at the superlatives surrounding it. It's the biggest IPO ever. It'll be the first company to move people to Mars. It's going to mint the world's first trillionaire.

15:09I almost said billionaire and I had to correct myself. And this is kind of the point, right, George? I mean, this is the Elon Musk formula. Create an entirely new category and then, you know, claim leadership and set the standard and, you know, make everyone follow in your footsteps. If that's the case, how does someone analyze a company like this? Because whatever you do, he's going to come back with, well, it's never been done before, so you can't compare it to anything. Yeah, I mean, that's why it's extremely hard. But I think when you look at it, I think we do understand pretty well the launch business as it stands today.

15:44We understand the connectivity business, the satellite business pretty well. And I think the big variable here, again, is that AI business. And it's a variable out there for a number of other companies. But look, I think launch, we saw some 76 % of the launches were primarily for Starlink. So when we think about the demand for launch in the future, look, I think there'll be more constellations that go up. But I don't think there's going to be more than five or six Leo constellations in the next couple of decades. and they're the ones that use a lot of satellites. They're the sort of 10 ,000-plus kind of constellations.

16:25And I think of those five or six, I think you're going to see two U.S. They're kind of Starlink and they're probably Amazon Leo. I think Europe might want one of their own. I'm sure the Chinese want a couple of their own. Maybe India gets in this game. I don't think anybody else's constellation is going to get launched on SpaceX launches. So I think it's going to be, even I think Amazon Leo is going to be launched largely on Blue Origin rockets as they get that going. So I think we're kind of looking at space kind of a flattish, maybe a slow growth kind of business as they do government work and things like that.

17:00And the connectivity business, that's all about, that's data, broadband data, that's direct-to-sale communications. We kind of understand that too. We have terrestrial providers. If you're in a big population center, they're going to do it better than SpaceX is going to do, given latency of going to a satellite, problems of being in buildings. But there are very important areas of the world that need that connectivity to a satellite to stay on the web and connected. And that will get better over time. But I think that's, you know, maybe it's what we're seeing sort of 20s-ish percent growth in the last couple of years.

17:39but some of the metrics are coming down in the amount each subscriber spends. It's decently profitable. It's not wildly profitable. So to me, everything shifts to AI, right? It's a big bet on data centers, putting them into the sky, putting them into orbit, where you'd probably be able to do it cheaper, cool it cheaper, powered easier. and then we'll stream data up to satellites and Grok will help us figure out what to do in the future. And that's kind of, to me, the big, big vision. Yeah, I'm looking at just kind of where the revenue comes from, George, just on a trailing 12-month basis. Round number is$11 billion from the connectivity business, $4 billion from the space business.

18:23And then at the bottom is AI at$3 billion of revenue. But when you think about a company that's going to be valued at at least 95 times revenue, it seems like the buyer today is saying, I'm putting my money on this AI thing because I think that's going to be something just astronomical. I guess it's the AI play that kind of gets you to where you need to go for if you're a long-term investor. Yeah, I think if you look at some of the recent deals cut with Anthropic, right? So what that's a billion and a quarter a month, I guess as long as they keep signing that agreement, you're going to see that AI revenue jump up pretty dramatically here over the next year and years, right?

19:06So I think when we look at sort of what we think is going to be at the end of 2026, we think it's going to be a$14 billion connectivity business and a$14 billion REV AI business. And I think one of the interesting things we saw is SpaceX built Colossus 1 and Colossus 2, the two big data centers down Memphis, Tennessee area. They did it in existing buildings so they could get it up and running very quickly. It's sort of a typical Elon Musk way. He's looking to drive down the cost quickly. That's smart for any business person. Put a lot of capacity online. Now he has the opportunity to sell some of that to Anthropic.

19:47I think Google's in there too. So you're going to see that AI, you know, revenue line drive up, but they spend a lot of money to keep that going, right? I think they're going to consume even more than the revenue they bring in. And there's like four, five, six billion dollar deficits in that operating margin, sorry, operating profit for that business. So you've got to find a way to power all that investment you need. this IPO is about, we're going to invest a lot of that money into data centers and we'll invest some of it into Starship because we think long-term it's going to be easier to make those data centers in space.

20:21That'd be cheaper. And so that's where a lot of this money goes. That's the bet. Stay with us. More from Bloomberg Intelligence coming up after this.

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21:03Every business has an ambition. PayPal Open is the platform designed to help you grow into yours with access to business loans so you can expand and hundreds of millions of PayPal customers worldwide. Your customers can pay all the ways they want today with PayPal, Venmo, Pay Later and all major cards so you can focus on the future. When you need a partner trusted by millions, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loan subject to approval in available locations. If your best finance people are doing expense reports, chasing receipts, or spending time on month-end close, it's time to get Brex AF, a gentic finance that eliminates that work before it starts.

21:45Learn more at brex.com slash AF. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Well, let's continue to talk about space. Why not? Ross Hamilton, Chief Operating Officer for Space Network, joins us here in our studio. Ross, one of the things that I think got investors' attention on this roadshow as I try to think about the opportunities for SpaceX and for the industry is the company and Elon identifying a$29 trillion total addressable market.

22:26Do we have any idea where that number really comes from? Well, thanks for having me on again. It's a huge number. It really is. I don't know if AM could really add up the numbers. I'm not quite sure exactly where that comes from. But I think the thesis is what SpaceX is eventually going to become. It really wants to be the infrastructure that's running all industry, all markets. So if you think about the internet in the 90s, they're really trying to create the backbone for AI infrastructure, computer infrastructure for the century. So what they are looking to do is put a lot of AI infrastructure in place, lots of chips, lots of robotics, not just for their own use for SpaceX and not just for Tesla, but they're looking to do that for all industries.

23:11So if you have a long term view on AI chips and infrastructure and compute, then the argument is that all industries would benefit from that. Of course, SpaceX has become a government contractor. It's done a lot of the work that NASA used to do. So one of the addressable markets is the U.S. government, and that's a big customer. Can we quantify just how big of an opportunity that would be going forward? So I think it is pretty big. I mean, if you think about the relationship with NASA as well, you know, NASA's focus is shifting to more exploration. But from a government standpoint, it's definitely be more on the national defense, golden dome type strategy.

23:53as long as the US particularly wants to be the dominant force and has recognised through Space Force that much of the military will be guided through satellites and that technology. I think it's basically our prime for the US government. So how do you guys think about, I mean, how does this relate to your company and what you guys are doing? Yeah, so we're really focused on the private sector. So we're helping space tech companies who are not yet public commercialize. So raise capital, find customers, focus on revenue. And the thing that's really important there is with what the SpaceX is doing is it's going to generate a lot of liquidity in the marketplace.

24:34So as people spin out from SpaceX, go and do their own thing, it's drawing attention from private equity and venture capital into the market. That's going to draw a lot of capital in. So from our standpoint, it's going to increase this focus on the opportunity. But our argument is, though, that it has to be on the basis that there's real customers for those space technologies. And our thesis is that aside from governments, you know, and NASA who are doing space exploration, that's actually a non-space industries. So financial markets and global logistics, agriculture, pharmaceutical. that's the market there.