The Biggest IPO In History Isn’t What You Think It Is

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1:40Today's number, 90. That's how many seconds Russell Brand spent trying to find his favorite Bible quote live on Piers Morgan before he finally gave up. The former comedian was on the show to discuss his new book, How to Become a Christian in Seven Days. Sources say step one is to be accused of sex crimes. Money market matters. If money is evil, then that building is hell. The show goes on! The first of them that watch the show, show! Welcome to Prof G Markets. I'm Ed Elson. It is April 28th. Let's check in on yesterday's market vitals. The major indices were mixed as Trump considered a proposal from Iran to end the blockade and open the Strait of Hormuz.

2:28The S &P and the Nasdaq edged up to new records while the Dow fell slightly. Meanwhile, oil prices rose and Microsoft stock fell early on the day on a renegotiated deal with OpenAI. The stock later recovered to end in the green. More on that later. OK, what else is happening? SpaceX is gearing up for the biggest IPO in history, but investors are starting to wonder what exactly they are being asked to buy. The company is targeting a$2 trillion valuation, which would instantly rank it among the largest companies in the S &P 500. that this is no longer just a space company. It's also a satellite internet company, a launch company, and increasingly an AI company with new bets and new acquisitions adding to the story.

3:17And for all of the hype, there are real questions hanging over what would be the market's biggest event in years, such as can space-based data centers actually work at scale? What happens to Elon Musk's control once the company goes public? And ultimately, can that$2 trillion valuation be sustained in the public markets? Well, here to help us answer many of these questions, we are speaking with Patrick Boyle, professor at King's College London, former hedge fund manager and host of one of the most popular finance YouTube channels. Patrick, so good to see you and so glad to finally have you on the show.

3:54I wanted to speak with you because this SpaceX IPO is set to be one of the most important events in a really long time in the financial markets. And you recently released a video titled, quote, the SpaceX IPO scandal. So I will start with the obvious question, which is, why did you describe this IPO as a scandal? How is this company being sold to investors? What are you skeptical of with this IPO? Well, the thing that's quite questionable about the way this IPO is being done is just the way that it is being forced into the NASDAQ 100 index almost instantly. I think there's going to be a 15-day delay and also the weighting that it'll be given is much higher than you would expect for a company with a very low float.

4:45So in a funny way, the company goes public at a very high valuation. People will probably buy in. Firstly, there's A lot of people are just very excited about Elon Musk and his companies. They'll put money in, but then the expectation is that the indexes will be buying 15 days later. You know, at the current valuation they're talking about, it would have a 4.5 % weight in the NASDAQ 100. There's also been talk about possibly S &P pushing for early inclusion as well. And that would essentially mean that there's just a frenzy of it being bought up, stuffed into the portfolios of people who index, who are not really valuation sensitive.

5:34And it's the valuation they're talking about. To be clear, they're talking about 125 times sales. So that's not earnings, that's sales. And we don't even really know what the earnings are of SpaceX. There was, you know, Reuters published that they had EBITDA of$8 billion. But EBITDA is not earnings. It's earnings before essentially the cost of building satellites and building rockets, you know, which for SpaceX you have to imagine is a significant cost. there's a famous quote from I think around 2002 where Scott McNeely who was the CEO of Sun Microsystems spoke about you know the price that people had invested in Sun Microsystems and he said well you went you know what were they thinking they invested a 10x sales and he said you know if you put your money in a 10x sales in order for me to return it to you in 10 years time I have to pay all of the earnings out, or sorry, all of the sales out as dividends.

6:45And that assumes that I'm not paying any staff, that I have no R &D cost, that there's no manufacturing costs. He said there was no way people were going to get a return on investment at 10 times sales. Now we're talking about 125 times sales. And, you know, it's worth noting as well that SpaceX is, It is an exciting company. It is growing, but it's not growing. You know, analysts expect it to grow 25 % next year. That's not good enough. Like Google went public, I forget how long ago, but they were growing at 240 % a year and they went public at 10 times sales once again. And so the price, it's not really, the question isn't whether it's a good or a bad company.

7:35A bad company can be a good investment if you get in at a low enough price, and an amazing company can be a terrible investment if you overpay for the stock. So much in there to unpack. I mean, I guess let's just focus on the price for a moment. Why is, I mean, when it goes public, you could imagine a world, if we lived in an efficient markets world, you could imagine a world where investors would say$2 trillion. that's ridiculous. I'm not buying. And the stock immediately plummets, in which case, maybe it's not a problem. It seems as though in the private markets, there seems to be a little bit more BS available and you can command these kind of ridiculous valuations, I guess, because the negotiations are a little bit more entrenched and Elon just says$2 trillion and we say whatever and we sign the contract.

8:27But I feel like there's a bit of a, it's a harder bar to hurdle to get over in the public markets. So I'm with you on all of this, but I wonder if maybe there's an argument to be made here. Well, if it goes public, the markets will decide what the true valuation is, and therefore maybe there isn't a scam. Yeah, I mean, that is the purpose of markets, is to essentially weigh these companies. And in the long run, it doesn't matter. In the long run, a good company that grows earnings will go up and and but of course in order to go up more than the market it needs to surprise to the upside right like a company needs to be better than people thought it was to perform better than the market if it's if people are right about how good the the company is well then it would expect to get uh you know standard stock market returns so So when you go public at such an extreme valuation, I mean, the likes of which has never been heard of before.

9:33You know, it's funny because there's some analysts out there and they're saying, well, there's nothing to compare it to. And, you know, you can compare it to aerospace companies. You can compare it to technology companies. You can compare it even to, we'll say, just companies like NVIDIA that have a product that there's a lot of demand for. And, you know, and then you'd say, well, how much is NVIDIA growing? How much will SpaceX grow? Blah, blah, blah. But, you know, the problem is there's nothing to compare it to if you go with a valuation like this. If you went with a more, I don't know, moderate or, you know, earthbound valuation, there's plenty to compare a company that, you know, that is an Internet service provider.

10:19you know, a very small AI company and, you know, delivers payloads into space. Right. It almost seems as though, I mean, the markets will decide what the valuation is, but thus far, they have taken a few kind of shortcuts to achieve this valuation. And it seems that some of those shortcuts would include talking about data centers in space and talking about the future and then merging xai and putting that into the company and then buying cursor and putting another ai company into the thing so that you have to keep on growing and growing and growing and then the other point that you make which i up until now hadn't thought properly about is the idea of just short cutting your way into the nasdaq which i assume immediately puts more buying pressure on the stock because it's essentially inserted into people's portfolio many 401ks throughout the country, thus resulting in an elevated valuation.

11:23Hence, it seems like that's kind of where the scandal is, that it's employing all of these strategies to almost fake it. Yeah, like, you know, the idea that, so firstly, NASDAQ had to change all of their rules to allow this inclusion, because normally a company needs to be, you know, But there's a list of rules as to how they weigh, you know, a low float company going into an index, how long it's been public. Because the idea is it needs to be seasoned in the market and sort of find a valuation with real buyers and sellers. So normally you would expect it to take about a year at least to even consider adding it.

12:0415 days is unheard of. And then getting rid of the caps for the float on it. And, you know, Reuters reported that this is because Elon Musk negotiated with Nasdaq and said, you know, we can list this thing on the NYSE. We can list it on the Nasdaq. We can list it wherever we want. If you want it on the Nasdaq, you have to go with fast-tracked index insertion. And so that, you know, it's, I mean, obviously that's good for everyone who already owns SpaceX stock. But if you are a person who owns index funds, and it's worth noting, it's not even just index funds because there's an awful lot of, you know, fund managers who claim to be active managers.

12:55But if you look at their portfolios, they look exactly like an index. And so apart from the indexes, Bind, there will be just a bunch of portfolio managers who say, I can't afford to take the risk of not owning a stock that's four and a half percent of the NASDAQ if I'm being judged against the NASDAQ. And so, you know, in all honesty, it's a very smart way of maximizing demand for the stock right on the point of it going public. You know, it's questionably ethical from the perspective of the people at Nasdaq to sort of change all of their rules, you know, right around what is by far the, I believe it's the biggest IPO in history.

13:39because before that with Saudi Aramco, where they did, I think they did a$29 billion IPO. They're talking about$75 billion for this, you know, the public float. Yeah, a lot of the ethical questions do land on the NASDAQ here. And I'm reminded of when the NASDAQ decided to include microstrategy in the index. And as soon as I saw that, I was like, oh, now it's really a problem. It used to be that this was just a guy who had this Bitcoin treasury company and it was kind of a bunch of BS, but if you bought it, you bought it and that's okay. But as soon as we systematized it - And if you bought it, you got what you wanted.

14:18But then suddenly you're putting it into people's hands who don't even know what it is or what they're actually buying. And I guess the question that I would ask is like, why is the NASDAQ incentivized to do this exactly? Why are they changing their rules? Why are they so desperate to include this company? in the index? Well, it's a huge, it's going to be a huge company, especially if it goes public at, at what, 1.75 to$2 trillion. It will be, I think there's only five US companies bigger than that right now. You're talking about like Google, Microsoft, NVIDIA, like, you know, they will be listing a big company.

15:00There's all sorts of exchange fees, trading fees, whatever that they earn off of this, they would be unhappy if it ended up on the NYSE, for example. Yeah. Just looking at the business itself, what do you make of SpaceX as a business? I mean, clearly, you believe and many believe that the valuation is a little bit nuts. It would be more valuable than Tesla. What do you make of this business? What do you make you the valuation well the the real question is there's there's an awful lot of stuff in there that you would consider sort of lottery tickets right like where it's stuff that it seems a little bit unlikely this whole data centers in space thing it's been tried there's a company i can't think of their name now but they they launched one nvidia chip into space in a little satellite to run an AI program where I think it was meant to, you know, learn the works of Shakespeare or something like that.

15:59It constantly had to be shut down because it overheats, because it's very difficult. You know, everyone says, well, space is cold, but it's also a vacuum and you need air blowing over something or water or whatever to cool it via convection. If it has to cool radiatively, you need these massive, massive cooling fins on it. And so the next version of this tiny, you know, Shakespeare satellite is going to have the second largest cooling array in space behind the International Space Station, right? Like, so we're talking about, you know, a very question, to cool like an actual data center, the type of thing they build on Earth.

16:44I mean, you're talking about cooling fins that are miles and miles square. Like, I mean, it would be the largest man-made object in space by a long, long, long shot. So in terms of, like, could this ever work? It could. Like, I mean, you know, it doesn't violate the laws of physics, but it might be very difficult to manufacture and to get up there in a timely manner. You know, there's also this kind of insane expectations around the real profit centre. Like 66 % of the profits, at least as far as we know, of SpaceX come from Starlink, you know, the satellite internet company. And they have at the moment around 10 million paying customers, I believe.

17:32You know, there's some analysts out there and they said that they would reach 1.2 billion customers. Now, that's quite an amazing number when you look at the population of the planet. There's one billion people on the planet who earn$35 a day, which comes to a bit under$12 ,000 a year. They will not be paying for$150 a month internet access. The question is, how big can Starlink get? and it's reasonable to think that maybe it's close to its capacity. And then when you even look at SpaceX's launch, they are the biggest launch provider in the world. They take the most stuff into space. But I think around two-thirds of what they bring into space, if not more, is Starlink satellites.

18:29It's their own stuff they're putting up there. So in terms of like how big the market is for other companies that want to put stuff in space, it's not obvious that it's a whole lot bigger than what's being launched right now. Patrick Boyle, professor at King's College London, former hedge fund manager, host of a popular finance YouTube channel. Patrick, we're going to have to continue this discussion another time because there's so much to get into here. and it is going to be such an important event that people need to wrap their heads around and actually understand the details and a lot of those details that you bring up are massively important.

19:07So thank you very much for joining us. Thank you for having me on. It's been a pleasure. After the break, why emerging markets are on a tear right now. And by the way, we are heading out on tour at the end of May. So if you want to come see us live, go to profgmarketstour.com to get your tickets. Can't wait to see you.

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20:52We're back with Prof G Markets. Emerging market stocks are on a tear right now. The MSCI Emerging Markets Index hit a new all-time high yesterday, surpassing its February peak. The index is up about 16 % this year. That's roughly three times the gains of the S &P 500. South Korea and Taiwan are leading the move, driven by AI chip demand. This latest rally came on a report that Iran offered to reopen the strait in exchange for the US lifting its blockade of Iranian ports. However, the oil markets remain on edge, with Brent crude still trading at around$110 a barrel. So here to help us unpack what we're seeing in emerging markets right now, we are speaking with Sid Jain, Deputy Portfolio Manager at GQG Partners.

21:43Sid, thank you for joining us on the show. So before we get into what's happening here, could you just remind us what emerging markets actually are? What is this category? What does it entail? Absolutely. So emerging markets, it is a broad term, generally includes countries that are less developed earlier on in their financialization. But frankly, from a market's perspective, a lot of countries that fall under that aren't what you would consider emerging. So, for example, Taiwan, South Korea, this is generally highly developed, high-income countries. But because of their legacy, they still get included under the emerging markets from a markets perspective.

22:26Yeah. I always think that we should create a new name for them. I just feel like emerging markets doesn't really do it justice. Either way, those markets are up 16 % year-to-date. They sold off when the Iran war started, but they've now recovered all of it. And that's three times, more than three times higher than the S &P's gain so far this year. So they are massively outperforming U.S. markets at the moment. I guess the question is, why is that happening? Sure. So what's interesting with the current composition of the emerging market index is that it's really not a reflection on the underlying emerging market economies.

23:06It's basically become a bet on the AI CapEx build-out you're seeing. So the big drivers of the emerging markets for the last better part of the last two, three years now have been the semiconductor plays, specifically in Taiwan, TSMC being the big one, and South Korea, the memory companies, SK Hynix and Samsung. And in one stat that's pretty mind-blowing is that if you look at it on a year-to-date basis, those three semiconductor companies, TSMC, Samsung, SK Hynix, are driving almost 70 % of the entire index's earnings growth. So this has basically become a one-way bet on the CapEx buildup that you're seeing.

23:50We saw a similar thing last year where, again, emerging markets way outperformed the S &P. ESP was up 16%. Emerging markets was up 30 % for the year. Kind of incredible performance. Was that the same story? Was that a handful of chip companies in a few of these less developed economies? So that was a big driver. And just based on how large these companies are as a portion of benchmark, it moves the needle. So for example, TSMC alone has a higher weighting in this benchmark than the entire country of India. So it matters. But there are a lot of bright spots you're seeing across other non-semiconductor markets.

24:35So, for example, 2025 was a fantastic year for pretty much every country in South America. Brazil being another large winner, not just in 2025, but year to date, where the countries are actually doing quite well. Economies are improving. Their stocks are incredibly cheap. and an important catalyst has been a electoral cycle where the countries are moving from the left on the spectrum to more of a right-wing business-friendly environment. You're seeing that dynamic. But by and large, I would say a lot of these emerging markets have structurally improved versus what was the case 10 years ago. 10 years ago, these economies were in a funk.

25:18Morgan Stanley called, had a term called a fragile five for a lot of these countries. But as these cycles go, they've turned around and growth is finally coming back after a long time. Do you think that this is something that we're going to see continue? I mean, it's been kind of a spectacular rally for emerging markets last year, continuing into this year. And I feel like that was a big question at the start of the year, which is like, is, I mean, it was an anomaly that the U.S. was kind of outpaced by basically everyone else last year. The question for 2026 was like, is that going to continue to happen?

25:53So far, the answer is yes. Do you think that it will continue to be yes going forward? So I would say you do have to look at it from a country by country basis, because again, the index is so misleading given how lopsided it is on AI. If the AI topic story slows down or God forbid turns negative ever, then the index will be in a world of pain. However, outside of that, there's a lot of attractive bottom-up stories. I mean, I talked about South America, India, we're finding opportunities, Eastern Europe. So there's actually quite a bit of exciting names. And I think what's, again, where we are in the cycle is so fascinating, where for the first time you're seeing earnings growth in these countries actually look pretty strong, which was not the case pre-COVID.

26:42So for example, if you take in India, from 2010 to 2019, India earnings growth was basically zero on a dollar basis. Now you're getting low to mid-teens earnings growth and sort of fundamental change versus what was the case before. How much of this has to do with the sell America trade, which made a lot of headlines last year? It turned out not really to be sell America, it was probably more like hedge America. You weren't really seeing that much selling pressure on U.S. stocks, but ultimately you were seeing a lot of buying pressure on all the other stocks. How much of this is that versus, say, just the incredible performance of a handful of these AI companies?

27:29So I wouldn't go, I wouldn't characterize it as sell America, but rather just people realizing how underexposed they are to the rest of the world. Because for the better part of 15 years, the best earnings growth by far was in the US. There really was not many other options. The Tina trade, so to speak, there's no alternative. That's kind of over. Where, yes, US are some fantastic companies, but from a growth perspective, you're seeing it percolate to other parts of the world. And so it doesn't make sense to have all your eggs in one basket where you can find better opportunities at generally lower valuations outside the U.S.

28:12So it's more about rebalancing than a wholesale let's get out of America. Yes, but certainly to do with it, it sounds like a rebound. I mean, so much exposure in the U.S. and then it's like, OK, well, we need to de-risk somehow. Just going back to Iran for a moment. As I mentioned, there was this sell-off and then emerging markets recovered. And it seems as though this is largely a result of investor expectations about the supply chains of these chip companies, I think, though it's kind of hard to understand how the markets really feel about Iran and the Strait of Hormuz. What can be said about what's happening in Iran and how it relates to the performance of emerging markets so far?

28:54What do we know about the relationship between the two? No, it's an excellent question. And I don't think it's just an emerging market question, but also a developed market question in the U.S. So the AI excitement has thus far overcome any potential down implications from this Iran conflict. Because the view is AI is a structural theme and the compute shortage, so to speak, is worse than the oil shortage. That's the market perception. Our view is that the straits are still very much closed. Brent oil is close to$110 per barrel. And if you look at the refined products of gasoline, diesel, jet fuel, they're closer to$200 per barrel.

29:40And you're already seeing an economic slowdown across most Asian countries. And our view is that the next leg will be in Europe. So we're actually thinking the markets are being very complacent about the risk of an oil shock or a higher for longer oil environment. What do you it's so interesting because I could understand why American investors feel this way. This this let this complacency that we are that some people believe is is present in the markets right now as it relates to Iran. In America, there's an argument to be made that America is insulated. We're energy independent. This isn't going to be that much of a problem for the U.S.