SpaceX IPO ignites an investor frenzy

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0:17Good morning from the Financial Times. Today is Friday, May 29th, and this is your FT News Briefing. The U.S. and Iran are getting close to a ceasefire extension and hype over SpaceX's IPO is stratospheric. And that sort of attitude sometimes is a warning signal of maybe a kind of bubble in the market or too much hope, too much optimism. Plus, Robinhood is letting investors use AI to make trades. I'm Sonia Hudson, and here's the news you need to start your day.

0:59Negotiators from Iran and the U.S. have reached a memorandum of understanding, but President Donald Trump still needs to sign off on it. That's according to a White House official. The news comes after the countries have exchanged fire in recent days. The deal would extend the ceasefire by 60 days and reopen the Strait of Hormuz. Now, Iran did not confirm the White House's version of events, which were first reported by Axios. An Iranian news agency close to the Revolutionary Guards warned on Wednesday that Trump could unilaterally announce the agreement, even though Tehran thought some issues were unresolved.

1:48Investors are clamoring for exposure to SpaceX ahead of its initial public offering next month. There's so much appetite that one analyst called it a, quote, speculative frenzy. Can't blame anyone for wanting to get in on the largest IPO in history, but some investors say this much speculative trading is a red flag for the market. Here to tell us more is the FT's Emily Herbert. Hi, Emily. Hiya. Okay, so when we say that investors want more exposure to SpaceX, what does that actually look like? Yeah, so SpaceX hasn't listed on the market yet, and it won't for another couple of weeks. But something to know about SpaceX is that it's already quite widely held in investment portfolios and in funds as a private company.

2:37So a lot of investors are now rushing into mutual funds and also into exchange traded funds to try and get some access to SpaceX before it goes public in anticipation of what they think will be a share price pop. And on the ETF side, there's also been this wave of new products being launched in the last few weeks, which all promise that they will track SpaceX when it does IPO. Some of them are a bit more wacky than others. So we've even got some leveraged ETFs or inverse ETFs, which will give, say, double the return from just owning the SpaceX stock. So it's really a sign that there's a lot of activity.

3:16There's a lot of excitement. People are really keen to get a bit of the pie. Yeah, I read a quote in your article that's probably my favorite quote of the year. An analyst told you, quote, the ETF spaghetti cannon is firing away. meaning that you know people are just opening these new etfs at kind of a breakneck pace and seeing what sticks why has this ipo gotten investors in such a frenzy is is it just that it's expected to be the biggest it's expected to be the biggest ipo of all time but it also taps into a lot of the themes that people are really excited about in the market at the moment which is ai it's semiconductors it's building capacity for that data center build out and this is an exciting, shiny new way to invest in that.

4:00I think there's also a lot of anticipation because people know a lot about SpaceX. They know a lot about Elon Musk. One person who I spoke to said to me, the one thing about Elon is that his investors never lose money. So I think there's a faith from a certain portion of the investor base that with Elon Musk at the helm, this stock is almost guaranteed to do well. Well, what are some of the risks involved then? Yeah, so a few other investors have definitely raised concerns with some of this behavior. A lot of these ETS listing and this kind of frenzy in the market. People are kind of saying maybe this is a bit of a red flag.

4:40It's people wanting to take a stock even when they don't know what the price is. They're willing to pay any price. And that sort of attitude sometimes is a warning signal of maybe a kind of bubble in the market or too much hope, too much optimism, especially if there's a lot of interest right at the beginning and the share price goes up and up and up. And then suddenly there's a piece of news or something is found out about the company. A lot of people could lose money. Now, Emily, we should also point out that SpaceX is not the only major IPO that could happen this year. The AI giants Anthropic and OpenAI are also expected to list.

5:17what does this flurry of IPO activity mean for the market as a whole? Yeah, so on the one hand, it means that these companies can see the massive appetite for artificial intelligence and they want to make the most of it. But a few investors have pointed out that at some points in past stock market cycles, when you've had kind of big IPOs like this, big influxes of equity supply, it can be a sign that the cycle is near the top. And the reason for that, to some extent, is just because of the supply and demand dynamics that dictate the stock market. So you have companies issuing equities and you have investors who are buying stocks.

5:57And if you have a big increase in supply, like we're going to see this summer with probably SpaceX, OpenAI and Anthropic all listing, the question is, is there going to be enough demand to pick up all of that extra supply. Emily Herbert covers markets for the FT. Thanks, Emily. Thank you.

6:22Israeli Prime Minister Benjamin Netanyahu has directed the country's military to take control of 70 % of Gaza. That defies the terms of a U.S.-brokered truce between Israel and Hamas that took effect last year. The deal left Israel with control of about half of the Palestinian enclave. But Israel has recently escalated its operations against Hamas in Gaza. Netanyahu said his forces currently occupy 60 percent of the Strip. And Netanyahu's comments yesterday appeared to leave the door open to moving further into Gaza beyond his 70 percent goal.

7:08The digital trading platform Robinhood is joining the AI race. It will allow investors to use chatbots to build their trading portfolios. Robinhood joins a couple of other e-trading rivals in rolling out an AI feature, but critics are skeptical that it will leave investors better off. George Steer is a U.S. markets correspondent for the FT. He's been writing about the new AI trading era at Robinhood and beyond. Hi, George. Hello. So tell me about Robinhood's announcement this week. What'd they say? So they've rolled out a new feature that will allow customers to link their AI agents, chatbots, Claude, ChatGPT, to their Robinhood accounts.

7:53And basically the agent, the AI agent, execute trades on their behalf. This is a few months after eToro, another retail trading platform, rolled out a similar feature. and you know it's only a matter of time before other competitors get involved I'd guess because there's a big overlap between people who use chat gpt and claude and people who play the stock market particularly in the u.s and cynically the more robin hood customers trade whether that's through chat gpt or another bot or on their own the more fees that robin hood collect and how exactly does this feature work? Like, let's say that I am a Robinhood user.

8:32What do I do if I want to use this? Yeah, so you download this new feature on the Robinhood trading platform, and then you can kind of sync up whichever AI chatbot agent you use, and then allow the AI agents who kind of execute trades on your behalf. So you could say, every time this stock declines by 3%, buy more or vice versa, or adjust my portfolio if the inflation report on Thursday comes in hotter than expected, and so on and so forth. Is this way of using AI then something that's been tested? Like, does it work and help people earn more money in the market? Well, hedge funds and institutional investors use AI to help them trade all of the time.

9:18I think the experiment here is extending that kind of AI element to retail investors who otherwise use Robinhood and execute their trades manually. Whether or not that will help retail investors is a good question. I don't think there's much academic literature on whether ChatGPT is good for returns. Generally, though, Warren Buffett is famous because he doesn't chop and change his positions every day, right? His whole philosophy is that, you know, you buy and hold. So if you're trading more because you now have access to an AI agent, intuitively that might lead to worse returns, I'd wager. But it's an open question.

9:58Yeah, all depends on your theory of how to play the stock market. George, what is the introduction of AI chatbots to a retail investment platform like Robinhood tell you about the state of the market right now and the state of investing right now? I think this is a feature that would only be rolled out when markets are frothy and on the rise as they are right now. The S &P has hit a series of record highs. AI chips are on a crazy run at the moment. There are like triple digit percentage points. I read it as another way in which stock investing in particular has been like over the past few years gamified by these retail trading platforms.

10:42anything that makes stock investing easier and more fun, which I imagine this kind of will do. You know, that kind of attitude has become pretty widespread because stocks just keep going up and up and up and nothing really can stop them. It's a really fun game to play when the market keeps going up. Yeah, no one loses. Exactly. George Steer covers markets for the FT. Thanks, George. Thank you.

11:13You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Mark Filippino, Fiona Simon, Katya Kumkova, Victoria Craig, and me, Sonia Hudson. Our show is mixed by Alex Higgins and Sam Giavinko. We had help this week from Peter Barber, David DaSilva, and Gavin Kallman. Our executive producer is Topher Forges, and our theme song is by Metaphor Music.

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