Elon Musk Is Betting Big on Retail Investors With SpaceX’s IPO

0:00Where is Daredevil? I'm right here. Don't miss the return of Marvel Television's Daredevil Born Again. So what's next? We're gonna take this city back. In an all-new season, now streaming only on Disney+. They're hunting us. It's time we started hunting them. I can work with them. This should be tons of fun. Marvel Television's Daredevil Born Again, now streaming only on Disney+.

0:33Alex Ossola:Bill Gates tells Congress that Jeffrey Epstein tried to use his infidelities against him. I hope my testimony is helpful to the important work of the committee to find justice for the victims. Plus, the Justice Department escalates President Trump's campaign to find evidence that big banks were debanking conservatives. And inflation jumps to a three-year high in May. And that creates a lot of headaches for households when their incomes are not keeping up with what they're spending on groceries, on rent, on gasoline. It's Wednesday, June 10th. I'm Alex Osula for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

1:16Alex Ossola:We begin this evening in Washington, where President Trump said that the U.S. would resume attacks on Iran later today. That's what he told reporters in the Oval Office. So we'll see what happens. But we hit them hard yesterday, and we're going to hit them again hard today. Trump said the flare-up in fighting comes as both countries continue to work on a lasting peace deal. On social media today, Trump said that Iran has taken too long to negotiate a deal, and quote, now they will have to pay the price. President Trump also called on Congress to pass a short-term extension of a federal surveillance program, Section 702 of FISA, which is set to expire Friday.

1:54Alex Ossola:Senate Democrats have said they won't vote to reauthorize it because they're concerned about Trump's appointment of Bill Pulte as the acting director of national intelligence. Trump says that the program is crucial for national security. Staying in Washington, the Journal has learned that the Justice Department has sent subpoenas to some of America's largest banks, including JPMorgan Chase and Bank of America. The U.S. Attorney's Office in D.C., headed by Jeanine Pirro, is requesting information about whether these institutions debanked clients, that is, improperly closed customer accounts for political reasons.

2:26Alex Ossola:Banks have said they don't close accounts for religious or political reasons and that decisions to avoid certain industries or clients follow the law. The subpoenas escalate a campaign by President Trump to root out evidence that the banks allegedly discriminated against conservatives and politically controversial industries like gun manufacturers.

2:45Alex Ossola:On Capitol Hill today, Microsoft co-founder Bill Gates sat for a closed-door meeting in front of a House committee about his relationship with sex offender Jeffrey Epstein. Gates told Congress that Epstein tried to leverage information about his extramarital affairs, which he said had nothing to do with Epstein. Gates said today that it had been a mistake for him to ever meet Epstein, which the journal has reported that Gates did multiple times between 2011 and 2014, and that he was sorry he lent Epstein any credibility. He denied that he had any knowledge of Epstein's criminal activity. The ranking member on the committee, California Democratic Representative Robert Garcia, said that Gates acknowledged that he was around people who were abused.

3:25Alex Ossola:Gates also shared names of others in Epstein's circle. He didn't mention a few names of folks involved within the Gates Foundation or the Gates Orbit that we're interested in speaking with. One of those people Garcia wants to speak with is former Harvard President Larry Summers. Summers has previously said it was a mistake to associate with Epstein and that he was ashamed of some of his correspondence. New data from the Labor Department today show that consumer prices were up 4.2 percent in May from a year earlier. That's a three-year high, though it was in line with economists' expectations. WSJ economics reporter Harriet Torrey says there are signs that we could be near the worst of this rush of higher prices.

4:05Economists are saying that it's possible that this month was the peak for inflation, given the fact that gasoline prices are coming down. However, there are a few caveats to that, because, for instance, food is often delivered to grocery stores in trucks, and sometimes a big jump in diesel prices can impact that. We didn't really see that this month, but it is possible that we see those types of pass-through effects coming down the pipeline, so to speak. And that creates a lot of headaches for households when their incomes are not keeping up with what they're spending on groceries, on rent, on gasoline.

4:35And over the long term, that could be a headwind for economic growth.

4:38Alex Ossola:Persistently high inflation is looming large for the Fed, which has its first meeting under new chairman Kevin Warsh next week. The Fed has often said that they try and see through short-term shocks in energy prices. The problem is that nobody knows how long this is going to last. We started this year with investors pricing in rate cards because the labor market was looking wobbly and inflation seemed to be pretty much under control. But that script has really flipped in the past couple of months. Coming up, stocks dive after that inflation report. Elon Musk is betting big on retail investors for SpaceX's IPO.

5:12Alex Ossola:And as the World Cup kicks off, we'll help you choose a team to root for. Those stories and more after the break.

5:21WSJ's Take on the Week gives you a leg up on the world of money and investing. We cut through the noise and dive into markets, the economy and finance. I'm Telus Demos. And I'm Miriam Gottfried. We break down the big trades, speak with the key players, and find out what's important for investors in the week ahead. Subscribe to WSJ's Take on the Week wherever you listen to podcasts.

5:50Alex Ossola:The Middle East war and the inflation it's causing weighed on markets today. The Nasdaq led the losses, dropping 2 percent. Worries about AI have caused a series of volatile trading sessions this month. The Dow fell 1.9 percent, its worst one-day decline since October, and the S &P closed 1.6 percent lower. Futures for Brent crude, the international oil benchmark, rose 1.8 percent to more than$93 a barrel. On Friday, SpaceX is expected to make its stock market debut in the biggest initial public offering of all time. It'll be a particularly big deal for everyday investors, who over the past few years have coalesced into a market-moving force.

6:31Alex Ossola:and traded stocks at unprecedented volumes. Journal Markets reporter Hannah Aaron-Lang has been covering the retail investor revolution and is here to tell us what this means for SpaceX. So Hannah, how is Musk thinking about retail investors on a sort of philosophical level? This is a crowd that Musk has engaged with, tapped into for years. And he was one of the first executives in corporate America to really recognize that this group was powerful, that they could be really loyal followers of him and his companies. So we saw that happen with Tesla, where retail shareholders are about a third of the entire investor base.

7:10For SpaceX, what we're seeing discussed is an allocation to retail investors of about 20 % as of right now. And that's much higher than the typical allocation to retail in an IPO, which is usually like 5 % to 7%.

7:25Alex Ossola:Why would SpaceX want that? Why would they want a higher proportion of retail investors? I think this is something that Musk believes in. But then I also think that the general perception of retail investors, individual investors, the perception of those folks is changing on Wall Street. And, you know, the sources that I talk to tell me that this was maybe once considered an unsophisticated group. Now I think individual investors are viewed as potential loyalists or even evangelists for your company. I want to talk a little bit about what an IPO like this means for these retail investors. So company stock can be kind of erratic after an IPO, right?

8:05Alex Ossola:It could go way, way up or, of course, way, way down. What kind of opportunities and risks does that present for these retail investors? As with any initial public offering, this comes with pretty serious risks for individual investors. And then I think there are also concerns that are specific to SpaceX. You know, SpaceX has a financial picture that is notably worse than any other mega cap U.S. company, right? They had a loss last year. They're not making a profit. For SpaceX, the price-to-sales ratio is close to 94 times. Just for context, the price-to-sales ratio of the S &P 500 is like 3.3.

8:45And I want to also just make the point that the investors that want to get a share of SpaceX, they know all this. But they're fervent believers in Musk, and they just don't think that there's, you know, a formidable competitor out there, especially when it comes to space.

8:57Alex Ossola:That was WSJ Markets reporter Hannah Aaron-Lang. Thanks, Hannah. Thanks for having me. And in international news, last night, violence broke out in Northern Ireland. A video showed a man stabbing a victim on a street in Belfast, and a Sudanese asylum seeker was charged with attempted murder. That video went viral, and hours later, groups of masked men targeted minorities. Cars, buses, and some homes were set on fire. In a news conference today in Belfast, Northern Ireland Secretary Hillary Benn condemned the violence. The fact that people in Northern Ireland are being targeted because of the color of their skin should sicken every right-thinking citizen of the United Kingdom.

9:41Alex Ossola:It's the second time in recent days that the UK has confronted public anger over rising immigration. Last week, protests flared in southern England after a university student was stabbed by a British sick man.

9:58Alex Ossola:It's finally time. The World Cup is kicking off tomorrow, and there are 48 teams competing from all over the world. Now, we should say that most people choose a World Cup team to back based on a personal connection. Totally fair. But if you don't have that or you're looking for a backup, we have you covered. WSJ has a little quiz of just a handful of questions to help you decide on which team to root for in this year's World Cup. To help me test it out is WSJ audio producer Pierre Bien-Aimé. Hello, Pierre. Welcome to this side of the microphone. Hello. Yes, I'm excited. World Cup every four years.

10:30It's just the best thing.

10:32Alex Ossola:The best. Okay. So do you have a team that you already support? As you might guess from my name, I am a fan of France, and it's been a good generation to be pulling for them because they've done quite well in recent tournaments. That seems important, but we're going to help you pick a backup just in case they get knocked out super early or something. Not saying that would happen, but you never know. Okay, so I'm going to ask you some questions based on this quiz, and we're going to see what team best matches your personality, basically. Are you ready? Great. Let's do it. Okay, awesome. Question one.

11:02Alex Ossola:What is your preferred gameplay? A, attack, attack, attack. B, defense first. Or C, balance all the way. Attack, attack, attack. Too easy. I mean, it's just that is the more fun, gratifying soccer to watch. So, yeah, it's what I'm going to root for. I somehow guessed that without even knowing. Okay, next question. How much of a contender do you want? A, give me the front runners. B, I just hope everyone has fun. C, show me the dark horses. I'm going to go with I just want everyone to have fun in the middle there. You know, I just want to see some entertaining soccer. Okay, all right. I'm a little surprised with that one.

11:37Alex Ossola:Question number three, want standout players or more of a collective approach? A, there's no I in team. B, nobodies are cool with me. C, gotta be the superstars. I'm going to go with gotta be the superstars. That is the point of a World Cup. These teams, they don't play with each other for that much. They're not playing with each other season in, season out. And so the superstars really just get to shine. Okay, Pierre, we're down to only two teams. We're in the final. How experienced do you want your team to be? Do you want youngsters or do you want veterans? Let's go with the youngsters. And your team is, it's thinking, it's thinking, it's thinking, Norway.

12:14Oh, boy. I'm seeing Norway playing this World Cup. They're playing against Iraq. I'm seeing that game in Boston. And, yeah, it should be pretty exciting to see how they do. So France is also playing Norway. So this is a tough backup for me to get when they come head-to-head. It's going to be France.

12:28Alex Ossola:That's very fortuitous that you're going to see them play live. Yeah, it's their first World Cup, I think, since something like the 90s. You've got a lot of teams who have not been here in a long time. so their fans should be super excited about that. Well, Pierre, thanks for playing and enjoy the World Cup. Thank you. You too. If you want to try taking this quiz and find your own team to root for, you can visit the quiz page on WSJ.com. We'll leave a link in the show notes. And a final note, this morning's episode of What's News incorrectly said that the Senate had included funding for an anti-weaponization fund in the immigration bill that passed last week.

12:59Alex Ossola:In fact, the Senate bill refrained from adding language to kill the fund. And that's what's news for this Wednesday afternoon. Today's show is produced by Danny Lewis and Anthony Bansi with supervising producer Tali Arbel. I'm Alex Osilev for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

13:26How do you prepare for the week ahead? Why not start with thinking about your investment portfolio? On WSJ's Take on the Week, we break down the top headlines. If the AI narrative hits a wall, there's no question in my mind that the U.S. economy starts to go perilously close to recession. And we go behind the biggest stories in markets, the economy, and finance. I'm Telus Demos. And I'm Miriam Gottfried. We break down the big trades and speak with the key players. I'm very focused on making sure that we can get inflation back to target. Let us help you start your week. With WSJ's take on the week, subscribe wherever you listen to podcasts.