If you’ve been on Blossom for a while, you might remember an ETF called $DXYZ that went viral a couple of years ago. The whole sell point was it being some indirect investment into private companies like SpaceX and Instacart ($CART), where the fund owned stakes of those companies. The ETF caused a frenzy when it IPO’d. The stock went up something like 200% within a few days until later plummeting, and I ended up writing a post on it. Long story short, the amount of shares offered to the public was small, and the amount of shares the ETF actually held of the companies was even smaller, leading to egregious demand that eventually sank. Fast forward to today, and that fund’s most valuable holding is IPOing. (You can see that post here: https://link.blossomsocial.com/7uYa/h3wew05j) Now, considering the IPO is only a couple of days away, I thought it would be valuable to share some thoughts on SpaceX. Especially for beginner or newer investors. First, I want to start by letting it be known that I think SpaceX is interesting and unique, and by most standards, would be called a high-quality company. I mean, you could probably find plenty of comments of me saying “If SpaceX IPO’d I’d probably buy” from years ago if you looked hard enough. However, just to be transparent, I am not buying into this IPO, and I do not believe it is the same unique, interesting, high-quality company that it was 2-3 years ago. In fact, removing the (in my eyes) subpar, cash-burning crap subsidiaries that Twitter and xAI are, SpaceX would actually be profitable, and in my eyes, more attractive. Starlink in its own right is a genuine market-leading platform and network that no other business or even government can compete with (and again, is profitable). And Starship is a real engineering marvel that no other company has matched yet. Whereas Twitter is an unprofitable, horribly-monetized social media platform, despite it being one of the most used social media platforms in the world. And xAI is a trailing 3rd-4th place model with no real edge aside from its integration with Twitter. Not to mention, the company’s “data centres in space” plans and xAI’s “$26 trillion TAM” are massively questionable. (Or just outright Absurd with a capital ‘a’ depending on how you define it.) I won’t be one to bet against Elon Musk’s ability, but this seems like pure hype. And it’s likely just a way for SpaceX to market itself (pun intended) as an “AI company” during the IPO to garner demand. All in all, I think these factors make the company much less exciting as an investment than what it used to be. But that’s only my view, and it brings us to the IPO itself. A phrase you might’ve heard lately in regard to this listing is “exit liquidity.” And this is really the main concern of the IPO. Exit liquidity is just a fancy way of saying “dumping my shares,” because essentially that’s all it is. Private markets are usually illiquid, so when you buy shares privately, you usually can’t sell. So when the company lists publicly, some institutions and private investors that got in early who couldn’t sell when the company was private, then cash out. And the people who buy the shares that those people sell, are the exit liquidity. For SpaceX, it makes sense why this is a concern, because lately there’s been a lot of share buyouts resulting in more SpaceX shareholders. The xAI and X mergers were all just shares changing hands, so when it got to SpaceX buying it all in the end, previous shareholders of X (Twitter) and xAI ended up with SpaceX shares that they may or may not want. Which they now have the opportunity to dump onto the market. To make matters worse, only 5% of SpaceX’s outstanding shares are being listed in the IPO, and 30% of that offering is being offered directly to retail. That means two things: 1) like with $DXYZ, the float being so small and the demand being so high means massive volatility and price swings. And 2) if those private shareholders wanted to dump shares, it’s likely to be dumping on retail. For perspective, IPO’s generally skew towards institutions. A typical retail offering would be around 10% of the total IPO float, which makes SpaceX’s 30% retail offering three times as much as the average. You can play with the definition as much as you want, but it would seem that SpaceX is doing this because they need the demand and irrationality of everyday people, to further maximize the success of an already batshit-expensive IPO. One could even say that it’s easier to “wow” retail investors with bullish rhetoric, which keeps them holding shares longer, and the stock price up. (Something Musk has done with $TSLA.) Which would be quite fitting, given that previous private shareholders aren’t allowed to sell most of their positions until 3 to 6 months after an IPO. Though most can sell 20% as soon as two days after the first earnings report. Overall, I’m not sure what will happen, but if you plan on investing, do it rationally. Do as much research as you can, and if needed, maybe wait. IPOs historically don’t do well in the first year or two, and S-1s don’t give nearly as much information on the business as the quarterly and annual filings. And leading up (and on) the first quarter or two of a business, the stock is usually volatile… never mind an overpriced rocket company set to be the largest-ever IPO in history that suddenly merged with an AI firm and social media company that are both unprofitable. All at the centre of a massive industrial bubble. Hype and demand for SpaceX shares will be massive. But in what world does “hype” and “demand” in the same sentence for the stock market end well? Rhetorical question, of course. I’ll be watching on the sidelines. That’s it. Happy investing.
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16 Comments
Solo FIRE@solofire · 2mo
IPO = It's Probably Overpriced
Wager @abudancefreedom · 2mo
$DXYZ has been a total dud, even with such a high stake in $SPCX before its IPO, DXYZ has failed to capitalize on its bull run, I was hoping to make some profit and get out, very disappointed with its performance.
Daisy Bear@daisy38 · 2mo
Great read Jacob 👍
R @dividude · 2mo
Agree with most of what you have said here as IPO s due tend to “round trip”. That aside, if you look at the ticker you mentioned, dxyz, it IPOd at $8.25 and is currently sitting at $36ish in slightly more than 24 months. Pretty solid in my book. Spcx is most definitely gonna pump then dump on its IPO, but will it dump back to the $162ish price range it supposedly gonna open at? I dont know, but in 2-5 years from now Im guessing that stock will be much higher than its IPO price. It really just comes down to do you think its a strong company with good guidance and scalability AND are you willing to hold long enough to realize its worth. Just my 2 cents.
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