It’s finally here! The hottest and most anticipated Initial Public Offering (IPO) is being launched today, June 12. We can’t recall an IPO as hot or as anticipated as the SpaceX IPO. To level set, an IPO is when the equity of a company is offered to the general public, which typically coincides with those equity shares being traded on the stock exchange.
For perspective, the accompanying table provides the biggest IPOs in American history. These are well-known companies that are immediately rewarded with high valuations. SpaceX is being brought public with a valuation of $1.75 Trillion. You read that correctly… TRILLION! That’s over ten times the size of the next biggest IPO, Alibaba. To further drive home the point, only 14 companies worldwide are currently valued at more than $1 Trillion. So, SpaceX is immediately being thrust into the elite realm right off the launch pad. Once shares of SpaceX commence trading on the stock exchange, there is a high probability the valuation will trade even higher.
Many hear SpaceX and think rockets, yet SpaceX is much, much more. SpaceX includes Starlink Broadband (global 5G wireless communication), xAI (Grok AI), space-based data centers, and low-cost crewed and non-crewed launch services for orbit, the Moon, Mars, and beyond. At this point, SpaceX has no competitors in sight. Given the size and importance of SpaceX, many stock index creators (S&P, Russell, CRSP, etc.) are fast-tracking SpaceX’s inclusion into their respective indices. The automatic heightened demand for SpaceX stock should help support the stock’s price. For passive index investors, they will naturally gain exposure to SpaceX in the coming months as those indices modify their compositions.
There are two other highly anticipated IPOs scheduled for the near future. Both companies are Artificial Intelligence (AI) companies, Anthropic and OpenAI. All three companies fall under the term “Hot IPO,” meaning these companies attract a lot of interest and are often oversubscribed. Therein lies the conundrum. Once listed on the exchange, investors often bid up hot IPO stock prices in an attempt to participate in the company’s growth. This often drives the stock prices much higher in the short term. Then, as the demand and supply drastically fluctuate, so does the share price. Hot IPOs can often translate into unbelievable volatility in the weeks and months after the stock is listed on the exchange.
Facebook’s (now Meta) offering was considered a Hot IPO. In early 2012, analysts indicated that its long-awaited IPO could generate significant interest from investors. Hence, Facebook was oversubscribed. When the market opened on May 18, 2012, investor interest showed a higher demand for the company’s shares than it offered. However, the stock fell precipitously in its first four months of trading. The stock failed to trade above its IPO price until July 31, 2013. Not all Hot IPOs start with such volatility, but it is important to note that stock prices can oscillate drastically until an equilibrium price is achieved.
The Jetsons era is getting closer. The age of robotic/computer assistance and space exploration is on the verge of takeoff. The only unfulfilled Jetsons promise is flying cars. We can keep hoping.
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