Inside SpaceX’s Historic $2T IPO: Nasdaq Debut, Crypto & Retail Traders, the Starlink Threat

0:13Stephanie Palazzolo:Welcome everyone to The Information's TITV. My name is Akash Pasricha. It is Friday, June 12th, and I want to welcome you to our special SpaceX edition of the show. Let's cue the intro. Three, two, one.

0:37Stephanie Palazzolo:SpaceX is going public today, and we are going to cover this historic IPO, the biggest ever from every angle. We're going to bring on a space industry analyst for a technical discussion on where SpaceX will have to go from here. We also have an expert on retail trading coming on the show. That is going to be a massive part of this story. so we'll get the latest on how everyday investors are thinking about it. But I want to start by bringing on our Elon Musk reporter, Theo Waite, to set the stage. He has been covering every inch of this IPO in the run-up. And I also want to bring on our crypto reporter, Yueqi Yang, because there has been some buzz in that arena, too, about this IPO.

1:18Stephanie Palazzolo:Theo and Yueqi, welcome to the show. It's great to have you back. It's me here. Theo, I want to start with you. Okay, so$135 a share was the price. This is kind of what we were expecting. What's the latest on who is actually bought into this IPO? So it's about 20 % retail, which is extremely high for an IPO, but is actually less than some people were thinking a few weeks ago. And then the rest is, you know, gigantic sovereign wealth funds. BlackRock is buying at least$5 billion. basically everyone is is pouring money into this thing and trying to fight each other to hand over even more money and you actually i mean literally everyone this kind of includes the crypto community right i mean you had some some great reporting this week on on crypto investors trying to get into this yes there's this new type of crypto product that allows investors to bet on the valuation of pre-ipo companies and these are called crypto perpetual contracts, which are a form of derivatives that allow people to speculate on the price of something without actually owning the underlying assets.

2:33So on Binance, on Hyperliquid, these kind of new products are slowly taking off. For the SpaceX crypto perpetuals, people are trading it at around $168, and that's about more than 20 % higher than the SpaceX IPO price of$135. So people are saying that this is a new mechanism for price discovery from the crypto market that shows how much interest there is in SpaceX because it provides a price level that shows how much people are willing to buy and sell at.

3:14Stephanie Palazzolo:Well, and you actually, this is kind of interesting because, I mean, Theo, you talked about the demand here. We know that every retail investor that placed an order for this, I mean, they're not going to be, they have not been able to get the shares that they ordered because of the fact that it's so oversubscribed. So you actually, I mean, this is a sort of a side way that you can get exposure to this asset. Are there risks here? I mean, perpetual futures, we know that they pose some risk to the crypto industry as a whole, right? Right. So this is totally different from owning the actual underlying shares.

3:50You're owning no underlying assets. It's literally based on thin air. It's not based on any underlying assets. It's not packed to anything. It is just providing a way for people to trade on the price, on the number itself. And perpetual futures itself comes with leverage. So there's also risk with liquidation if price does drop. And then there's also the risk of liquidity because a lot of these products are new. They're relatively thinly traded. On Binance, I saw that the past 24 hours, there's about$1 billion in trading volume, which is rising but is still not widely traded comparing to the more popular products like Bitcoin Perpetuals.

4:39Stephanie Palazzolo:So, Theo, is there anyone who has come out to be a seller in this scenario? I mean, anyone who is, I guess, short SpaceX or who has openly talked about? There's a lot of punditry. uh you know the the usual suspects Jim Chanos Michael Burry people like that uh there was a big Paul Krugman uh the columnist uh he wrote a big sub stack about this today there's a lot there are a lot of haters that are willing to criticize SpaceX um you know including people on the show sometimes but I'm not sure if anyone is brave enough to like immediately open a short on the first day I mean that that would be extremely risky considering the amount of you know, retail people that are trying to pour into this stock and the fact that, you know, the NASDAQ 100 index inclusion should happen in about a month, which is going to lead to another round of forced buying.

5:36Stephanie Palazzolo:I mean, I think longer term, there will certainly be shorts. I mean, there's going to be, you know, these lockup periods that will expire throughout the next year that will, you know, potentially give people opportunities to short. But I don't, I would be very surprised if there were some kind of gigantic short that someone was opening today. Yuichi, have you been tracking the prediction markets at all? Are they making use of this moment? Yeah. So on prediction markets, there's also bets related to SpaceX. On polymarket, they're offering investors outside of the US to bet on the closing market cap of SpaceX.

6:15And right now it's showing that there's about 78 % of chance that SpaceX will close at above$2 trillion valuation. But then the probability drops to around 50 % for it to close at more than$2.2 trillion valuations. It's important to know that these are markets that are only open to non-U.S. investors. You cannot make this bet on U.S. platforms such as Cauchy. And the reason is that the bet, the nature of the bet itself, resembles too much as securities contract. And in the U.S., that will imply that the prediction market is offering these contracts could potentially run into a security loss violation.

7:01So these are not events that you can currently bet on as U.S. users for now. Right.

7:08Stephanie Palazzolo:And we should say that we're taping this shortly after 11 o 'clock Eastern. So depending on how things change, when you see this, the numbers and predictions may differ slightly. Theo, where is Elon Musk today? What do we know about where Gwen Shotwell is going to be celebrating the occasion? So Elon is in Starbase. They had a broadcast this morning from there where he gave a little speech. There were a bunch of Elon fans here in New York that were kind of camped out outside NASDAQ. NASDAQ, hoping to catch him. But unless he gets on the private jet soon, he's not going to be here. But Gwen Shotwell, who's the SpaceX president and kind of the number two under Elon, as well as CFO Brett Johnson and a number of other kind of key execs were at NASDAQ this morning and are in New York today.

8:03Stephanie Palazzolo:You know, they also gave some speeches and there's going to be a big party at the JP Morgan Tower, I believe. So all the bankers and stuff are ready to celebrate too. Great. Well, Theo and Yueqi, I want to thank you both for coming on. That is Theo Waite, our Elon Musk reporter, and Yueqi Yang, our crypto reporter, here at The Information. SpaceX's technical ambitions are quite tall. To unpack the current state of the technology itself, I want to bring on Tim Ferrer, president of TMF Associates. Tim, welcome back to the show. It is so great to have you here. It is the first time that we've had you on since the S1 dropped, and we got a lot of new information in there, although we reported a lot of it here at the information as well.

8:53Stephanie Palazzolo:The one thing I wanted to start off with is Starlink. You and I were texting, and you pointed out to me that ARPU, Every average revenue per user has been coming down per the filing. Why is that? Walk us through your analysis. Yeah. So, I mean, Starlink started offering three second terminals early this year and offering discounted packages for people who want to use their own package. So when you go traveling and you take a second terminal with you. So that's had the helpful effect of boosting the subscriber numbers that they're reporting. But it also brings down the ARPU because those people just aren't paying very much.

9:28So what we saw in the first quarter is that SpaceX didn't add as much revenue in the Starlink business as they might have hoped. They added a whole bunch of customers, about almost 1.5 million customers. And that was great in terms of what it said in the S1. But the ARPU came down a long way. And now what we're seeing is sort of a reaction to that. They've been raising prices in May. They've raised prices in some ways again today. clearly they need to boost revenues from those customers and it's going to be really interesting to see if their subscriber growth really keeps up with what people are expecting so are you are you

10:08Stephanie Palazzolo:prices are coming up i guess from your analysis my question is if you equate today's price increases sounds like or the price increases we've seen with the impact on demand per your calculations are you expecting arpu to come back up i think that arpu will hopefully stabilize a little bit at least beyond the second quarter. But the real question is whether they add as many subscribers in the second quarter as they have done in the first quarter. That's by no means guaranteed after these price increases. We did see the company go out there and announce that they got to 12 million total customers last week.

10:47But that includes a whole bunch of government and enterprise customers who are very helpful for them. but that's not the consumer headline number that is reported in the S1. And so we'll see at the end of Q2 if that number on net ads is as good as people hope, because everyone's out there talking about how Starlink's going to have hundreds of millions of subscribers in a few years' time. Is this just an air pocket? I mean, I think Gwynne Shotwell was on TV saying, oh, well, we're running out of capacity in some areas. I mean, I think that's an excuse for some people. Other people would give the excuse that, well, maybe we need to ramp up production We're going to make some new terminals in the next few quarters.

11:26Maybe that will help. But at the end of the day, if you start charging more in a competitive market where you have to win customers from the existing broadband providers, you have to win them from Comcast and AT &T. And we see analysts out there downgrading the telcos and saying Starlink's going to catch all these customers. Well, they're not going to do that if they're charging$55 a month plus another$10 for the terminal rental, which is what they're charging at the moment.

11:55Stephanie Palazzolo:Now, this question of the threat that Starlink may or may not pose to telcos is interesting. You've written a little bit about the T-Mobile contract. What's the status of that contract? Well, there on the direct-to-sell, I mean, Starlink reported over$630 million of revenue from Starlink Mobile last year. And that slipped by the radar for a lot of people. But if they're going to grow from that, you've reported that the T-Mobile contract's only about$100 million in total. That contract's up for renewal in the next few months. I think a lot of people think that's going to be renewed in July. But Starlink need an awful lot more than$100 million to report an increase in Starlink mobile revenues this year.

12:38They probably need to increase the size of that contract by at least five times, maybe as much as 10 times. And T-Mobile's out there saying, well, no one wants to pay for it. It's a tiny proportion of our traffic. I mean, clearly that argument is going on pretty vehemently between the two companies about what they're going to pay. And I think T-Mobile's arguing, you know, they're teaming up with AT &T and Verizon for that matter to avoid Starlink trying to go around them. I think that argument is probably going to be won by T-Mobile at this point in time, because selling doesn't want to just pick up its ball and go home and say, yeah, sorry, we're turning off the service because we can't reach agreement on price.

13:19And when does that contract come up for renewal? Well, Musk has said on X that the contract is exclusive for 12 months. So I think a lot of people have assumed that that contract is due for renewal in July this year because that will be 12 months after they launch the service commercially. We don't know that for a fact, but I think the expectation is that they want to try and get more revenue to report this year. And so they're going to push for an increase in the size of that contract this summer.

13:47Stephanie Palazzolo:So price is one element of the Starlink equation. The other element, of course, is cost. What do we know about the way costs are trending to produce these satellites, to get these satellites up there? We'll talk about Starship in a minute because ultimately, you know, that is what we'll need to work out here. But just in terms of margins, what analysis have you done there? Yeah. So, I mean, Starlink, you know, every satellite it launched last year, which is over 3 ,000 of them, it costs them about$1.4 million per satellite to get those, to build them and get them into orbit combined. You know, that's an amazingly low number compared to what you see for other providers of broadband communications.

14:30And it just illustrates how far ahead Sarlink is and how difficult it will be for other people like Amazon to try and compete. But at the end of the day, you know, they have to build more satellites. They have to add more capacity and they have to build the terminals. And it looks like the terminals cost them something in the order of$300 each to produce last year. They're subsidizing those terminals pretty heavily, which is why the latest price increases are focused on charging people$10 a month for a terminal rental fee. and you know that is the area of biggest weakness people say you're gonna have 10 times more capacity with the next generation satellites you're gonna have a vastly cheaper to launch with starship yeah all well and good but at the end of the day when you're acquiring these customers you have to give them a terminal and if that terminal is costing you several hundred dollars and you're subsidizing that it limits your ability to go after the really low arpu customers i mean It's going to be really interesting to see if they get into India eventually, and that obviously has just been delayed.

15:31But if they eventually get into India, where people pay maybe$10 a month to broadband typically as an entry-level product, you can't afford to be giving away a$300 terminal to get those$10 a month customers.

15:44Stephanie Palazzolo:Right. Now, what about the Starship aspect of this equation? Remind us here of the current roadmap for where Starship is, where it needs to get to, and then eventually when you think that will end up having an impact or could have an impact on the Starlink business. Yeah, so they're obviously going to progress further with Starship this year. What it says in the S1 is that they don't need the full reusability in order to start launching these next generation of Starlink satellites. You know, that's great. That's exactly, you know, allowing them to get on and do this before they fully made this reusable.

16:23But obviously, it's a lot more expensive if you're going to be throwing away the second stage every time you do a launch. And it's going to limit your ability to launch really, really frequently. So they'll definitely be trying to do some experiments with launching the next generation of Starlink satellites later this year. And into next year, they'll probably try and ramp that up. But their priority next year is probably going to be to build out the next generation of Starlink mobile constellation, and put that$20 billion of spectrum that they just acquired from Echostar to use. And the broadband system probably comes beyond that into 2028 and possibly 2029 before they have a lot more of those satellites launched on Starship.

17:08Stephanie Palazzolo:Tim, as you think about the capabilities that SpaceX may have to acquire, it certainly has not been shy of acquisitions, not just in the space sphere, but otherwise, as we know. what acquisitions specifically related to the launch business and Starlink do you think you could see them making in the next 12 to 18 months? Well, I think that they've got an awful lot of the technology there that they need. They just need to perfect the whole thing. And they do this iterative development, which, you know, destroys a lot of things and blows a lot of stuff up. But at the end of the day, you know, advances the technology, you know, way beyond what other people have achieved.

17:48I think their biggest issue now is going to be what do they do about launch sites? Because, you know, if they want to be launching these orbital data center satellites, everyone talks about how those need to be in sun synchronous orbit. In other words, they are constantly in sunlight because they're at sunset on one side of the planet and at sunrise on the other side of the planet. And so they're going to need new launch sites. They can't launch to those orbits effectively from either Texas or Florida where they've got their current Starship launch pad. So what I'm going to be watching really closely is to see what they do about the launch pads.

18:21There's a lot of rumors about them buying land in Louisiana. And that's going to be a good place to do this because there's a lot of open sea to the south of that, which would be perfect for these sun synchronous orbit launches. I think that's where acquisitions are going to come is building out more launch sites in the future. Obviously, lots more money to be pumped into all of that. And it's going to be an expensive business. It's going to burn a lot of cash.

18:49Stephanie Palazzolo:Great. Well, Tim, I want to thank you for coming on. That is Tim Fair, president of TMF Associates here on TITV. Now, for more on what the retail investor is thinking as SpaceX hits the public markets, I want to bring on Tom Sosnoff. He is the founder of Tasty Trade and CEO of Lost Dog. Tom, welcome to TITV. It is so great to have you on the show. I want to start by asking you about the retail allocation. So we know that it looks like retail investors have gotten a smaller proportion than what they initially thought they were going to be allotted. What did you make of that? You know, it's hard to say.

19:27So I'm a retail investor now, too. And so I put in myself and I got – I was surprised, actually. I got a little more than I thought I would get. You know, we always put in for more and, you know, hope for something. And so I got some. So it's hard for me to say. Most of my friends that I talk to got something. Usually we get nothing. So we got something. So I'd say it's better than usual, I guess.

19:56Stephanie Palazzolo:And maybe just remind us, Tasty Trade lost dogs. These are lost dog, I should say, my apologies. Just walk us through the premise of the businesses first. Well, I built actually Thinkorswim was my first retail platform, which is now owned. It's now Schwab's primary platform. We were bought out by TD Ameritrade. And so I built Thinkorswim, which still exists today. It's one of the biggest trading platforms in the world. And then I built TastyTrade, and that was bought out by IG Group in London. And I just left to go build Lost Dog, which is not a brokerage platform, but it optimizes your career and your portfolio type stuff.

20:35So it's just a cool piece of software, and we're in the process of rolling it out and launching it. So I have 45 years as a market maker and building brokerage software, and then seven months building Lost Dog. Okay.

20:48Stephanie Palazzolo:So talk to me a little bit about how you then measure retail sentiment. I mean, the narrative of this IPO has been you've got a bunch of Elon fans out there. They want to get in on it. That's why the retail allocation was bigger than most IPOs. But, I mean, how do you even quantify that? How do you think about what impact that tactically has on the stock price, if at all? Well, I am long past believing Elon is just a great guy, okay? He's not on my what we call good billionaire list. I'm actually not a fan. But that said, I think he did a brilliant job by talking about the distribution to retail investors of getting an enormous amount of press and PR from this IPO.

21:42So I think as far as like a masterclass in getting, you know, probably the best press that any IPO has ever got, I would say this is it. And I know it's the largest IPO too, but I think that this has truly been a masterclass in free PR. And listen, that's kind of what it should be. You know, when you do an IPO, it should not go to, you know, all the big institutional investors and things like that. And it should go to the consumer because the consumer cannot participate along the way. I mean, you have to be an accredited investor. You have to give away a lot of your upside if you participate prior to the IPO.

22:22And then you have to hold on to the stock for six months and all this other stuff. So the retail investor really doesn't get to participate until the IPO. And they shouldn't have to pay, you know, some marked up, you know, IPO price. I'd rather see them participate on the actual price.

22:37Stephanie Palazzolo:Right. so i mean just walk me through this and you you said you you did buy uh some amount of spacex shares you i was allocated some yes you allocate okay yeah yes right um and forgive me here allocated does that i mean like are you do you not purchase it at the ipo price no no no you purchase it you purchase the out you purchase the price it hasn't it has it's not live yet that's all right so right you know but yes i i i have relationship at you know a couple different um uh financial firms include aside from our own and um you know i just asked for an allocation and that was it and one firm came back and said okay we'll give you a small allocation okay but you you will you intend to buy it at that price that you were out oh i yeah i yeah i i'm going to absolutely buy at that price and i'm gonna sell it the minute it opens maybe well that and that was my question was was are you at all is any part of your holder at all of the stock no it's not i'm not and the reason i'm not is because like i said i think this is i think spacex more than any other company i've ever seen has two things that i don't like it's the elon musk effect which is basically you know this is his show there there's there's nobody else involved and there's a huge single point of failure here for that reason um i and i'm not a fan so so because because what why well one it's kind of a joke but he did build a cyber truck which i don't think anybody should ever have to have to drive but the real reason i'm not a fan is that when you're the world's richest person, I don't think you should take the initiative to cost 270 ,000 civil servants their livelihood.

24:23And that has bothered me ever since the start of Doge. And I cannot forgive him for that. So, you know, like I drove, I was one of the first people that drove a Tesla. I mean, I embraced it from day one. I think I had three Teslas from like 2014 on. And when he did that, I just sold my car at the market and basically gave it away, and I didn't care and bought a Lucid. I'm not going to support people who I don't have any respect for, and so I'm not interested in investing in him. But I will tell you, I'm an option trader. I'll trade the crap out of the stock next week, stock and options, because there'll be tons of opportunity in there, and I'm going to put on lots of positions.

25:05But I'm not going to be just a net-long delta buyer. I'm not just going to buy stock.

25:09Stephanie Palazzolo:Now, my colleague, Corey Weinberg, he had a story out this week looking at how NASDAQ won the listing or how they secured the listing. One of the things he pointed out, of course, was that NASDAQ said that they will accelerate the ability to be included in the index. S &P has not. He had an interesting bit of reporting that he actually talked to a data provider that assesses sentiment online. on social media and stuff like that. And basically what the service found is that people are not thrilled about the fact that NASDAQ said that they are going to fast track the ability to be included in the index.

25:52Stephanie Palazzolo:What is your view on whether or not that should or shouldn't happen? I can understand why Tesla, I'm sorry, I can understand why Elon used the leverage that he has to do that because from his perspective, you know, he's got to fight for what's best for SpaceX. And I think in this case, the quicker that they get added to the NASDAQ, I mean, obviously that forces all the index funds and all the passive index funds to have to rebalance the portfolios into, you know, to buy SpaceX and the sooner the better. So from his perspective, I think this is a hard one for me because I don't like the fact that the NASDAQ caved.