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Instant Reaction: SpaceX Jumps in First Trades Following Record $75 Billion IPO
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Bloomberg Audio Studios Podcasts Radio News
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Ed Ludlow
this
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Venture Global Representative
is a breaking news update from Bloomberg. Instant reaction and analysis from our three journalists and analysts around the world.
- [02:03]
Kelly Leinz
I'm Kelly Leinz in Washington. But clearly all eyes are on New York today as SpaceX launches into public markets a record setting IPO of $75 billion priced at 135 a share. The stock opens on the NASDAQ 11% higher than that at 150. And as we speak down at the Nasdaq where this trading got underway, we find Bloomberg's Yahir on it who will check in with in just a moment as we consider it raised $75 billion in that initial offering, valuing the company at just about $1,8 trillion. That valuation, that market cap obviously significantly higher with the gain we are seeing today north of $2 trillion. So let's go to Yahira now at the Nasdaq for more. So yeah, higher. Obviously we're setting records here. What is the vibe like at the Nasdaq right now? It seems everything in this Process has gone pretty smoothly.
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Yahir
Yeah, pretty smoothly for the biggest IPO we've ever seen. And I will say the excitement, especially in the last hour as we were getting closer to trading, we was palpable. You felt it here at the nasdaq. They are all scrambling, making sure it all went off without a hit, without a hitch. And then outside you have all the Musk fans gathering, hoping to get a glimpse of him. But as you and I know, he was over in Texas. But as you said, Space X has officially begun trading and with the stock opening at $150 a share above its $135 IPO price. And that gave investors an immediate gain of roughly 11%. But now it is trading above that. But this values a company at Approximately just under $2 trillion, as you said, Kelly. But it instantly puts Space X among the most valuable companies in the world. More valuable than Tesla itself, of course, another Elon Musk owned company, Metta, and even Saudi Aramco.
- [03:54]
Kelly Leinz
All right, Bloomberg's higher on it live at the NASDAQ as Space X debuts. Thank you so much. So let's get more on this as we turn to Craig Trudella, managing editor of Global Americas here at Bloomberg. And Craig, obviously, while you hold that title now, you also led for a long time Bloomberg's autos coverage. You are very familiar with Elon Musk as the CEO of Tesla, which obviously, while being an auto company first and foremost also in financial markets and public markets, was the way to bet on Elon Musk. We now have a second channel for those bets in Space X. Whether or not these two get rolled together at some point, I'm not sure. But your reaction, please, to the appetite we are seeing for Space X as it debuts today?
- [04:37]
Craig Trudella
Yeah, I think it's fascinating to see, you know, yes, a strong debut for Space X, a rotation maybe a little bit out of Tesla, which is something that we were really braced for, but not anything disastrous. I mean, we've, we've seen, you know, on an intraday basis, the stock, you know, fall about 3%, but as of this moment, it's a little less than that, about 2.8. This is a company that, you know, has been quite volatile over the years in its own right. And if, you know, sort of that track record applies to Space X, then we should be sort of in for a bumpy ride here.
- [05:14]
Kelly Leinz
Well, certainly. So it's still Elon Musk that we're talking about. A visionary, maybe, but a lot of volatility we know, can come with that walk Us through the unique nature of the way this IPO happened, the idea that this price was set, it wasn't your typical price discovery. Musk said the price is $135 of. He got that. And obviously investors are buying this stock for more than that as, as trading gets going here. But how should we consider the way in which the valuation for this company was said? We were just listening to Jim Chanos talking about how skeptical he is of valuing a market cap at something 110 times revenue for a company that isn't profitable.
- [05:57]
Craig Trudella
Yeah, I think it's fascinating in that, you know, this is also a company that, you know, put out incredible numbers in their S1 about, you know, total addressable markets. And talking about space based economy, you know, to hear Musk talk about the potential for this company and to hear people like Jared Isaacman, you know, the head of NASA, you know, he gave an interview very recently about this notion that the space economy has been something that's been sort of highly speculated about, hyped up as something massive, and yet the follow through has been very minimal. I will say in defense of Musk and SpaceX, with the exception of Starlink, there's been very little in the way of progress toward making any money in space. We have seen SpaceX make progress where others haven't, but I think where you really run into trouble looking at this company is actually the AI portion. And the fact that that was just such a very recent addition to the SpaceX story maybe makes things kind of muddy and more complicated than they might have otherwise been had this just been a space company with a solid satellite business.
- [07:07]
Kelly Leinz
Well, a late addition, yes, but one that already does have some commitments tied to it, it seems. We all saw the news of Google's contract with Space X. That's going to be what, nearly $1 billion per month, assuming that Space X can actually deliver on the computing power that has been promised. How, how far do we have to go to Space X actually realizing these capabilities, actually having them to offer customers, not just like Google, but Anthropic is a big customer too, right?
- [07:37]
Craig Trudella
Yeah, the two of them in sort of rapid fire fashion, you know, reach these deals in the lead up to the ipo and surely that's helping sort of buoy sentiment. But if we think about, you know, Musk's ambitions to not just be a sort of infrastructure partner to the likes of Google and Anthropic and actually getting in the game itself and, you know, building a competitive chat bot and AI capabilities that can be monetized that's where we've seen, you know, real failures on Musk's part and he's been pretty open about that. Actually on X, this notion that they sort of started XI all wrong and are kind of starting over, it was, you know, really unusual and very like him that he would be so sort of candid about that and yet maybe raises some questions about, you know, just how quickly this will, will be a company that's a major player and actually, you know, things beyond partnering with, with companies that have had success like Anthropic.
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Kelly Leinz
Well, and you've just made the point, Craig, about XI getting rolled in to Space X. So would you be surprised if we see Tesla rolled in to this larger company too?
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Craig Trudella
You know, just, just going off the trend that we've seen this rolling up of Musk's companies. It does feel like that's also something that people quite close to Musk have, have not shied away about. You know, speaking to this notion that, you know, that would be, you know, not even just a sort of open secret, something that people are very comfortable theorizing about, tells me that it does feel like it's likely. I also think it's interesting in that we've heard Musk say over and over again that he wishes he had more control over Tesla. One of the ways to address the fact that he's not particularly comfortable with his command of that company would be to combine these, because that is an aspect of SpaceX's structure that is quite different, where he has a special class of stock that Tesla didn't have when it went public. If they were to combine, they would sort of rationalize that and give him the ability of, of, you know, stock that, that protects him from any activism or challenges to his sort of rule of the company.
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Kelly Leinz
All right, Bloomberg's Craig Trudeau, thank you so much. Space X right now trading at $164 a share. We're up nearly 22% from that $135 IPO price. Quite the debut we are seeing for one of the world's largest companies by market cap at this point after a record setting $75 billion IPO. Ed Ludlow owns Tech and space coverage, is the co host of Bloomberg Tech, and he's here with us now on this debut day for SpaceX. And I feel like this is your Super Bowl. It probably is, is most people in financial markets super bowl as we're setting records here, not just in terms of ipo, but in the size of this debut. Talk to me about about the demand here as we had questions as to whether or not this price was set correctly. Given the unusual lack of price discovery that happened, whether or not 555 million shares being issued was going to be met with adequate demand. Are we seeing evidence that perhaps the appetite was even more robust than initially thought?
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Ed Ludlow
Well, it was massively oversubscribed on the institutional side which accounted for 80% of the offering and on the retail side as well which was about 20%. And we can get into like more of specifics of how that sliced and diced. It's trading right now 167, 50, 24% above the IPO price of 135. What we reported over the last five days is that it has been Elon Musk himself along with Brett Johnson the CFO and Gwynne Shotwell the president that really controlled and dictated the terms literally as opposed to the bankers. Bankers have a lot of influence in IPO processes. But this time part of the rationale as it was explained to me, is that if you it early up ahead of a roadshow without a range, it is atypical and unusual. But you basically remove the leverage of the long only asset managers, the big institutions that would account for most of the order book anyway. It just made things on their terms. There are big questions about valuation long term. Right. It's come to IPO at 92 times or something like that, sales. But you know that that was how it was done. And so you know there are lots of retail investors that did get an allocation. Some evidence that they are people that are also Tesla retail shareholders. Anecdotal evidence I'd say. But now there are lots of people that are, you know, reluctantly and I guess not reluctantly is not the right word. They don't want to be buying in the open market, but they are, you know, they kind of have to be.
- [12:25]
Kelly Leinz
Yeah, perhaps some nose holding going on here to your point at about valuation. Walk us, walk us through what the thesis is here in terms of the total addressable market that Space X is saying that it can reach and what tangibly the company is now going to need to be able to accomplish from a technology standpoint to be able to deliver on that, deliver what it's promised to customers like Anthropic and Google.
- [12:48]
Ed Ludlow
So like right now on a fully diluted basis, this is a company that has a value of more than 2 trillion and they are pitching a story about a future where they are many things, a diversified business which most of is selling AI software. Right. They say there's a $28.5 trillion addressable market and 26.5 of that is what they are calling in an umbrella or bucket of enterprise AI. But in the near term, all of that is predicated on them being able to get starship, which is on paper, the most powerful rocket and launch system humankind's ever developed, to work regularly and reusably. They have done 12 test flights. They are closer, you know, in the coming weeks to doing a 13th test flight, but they've never landed or both parts of it, the booster and the spacecraft on top back on Earth. They have to do that if they are able to put into orbit satellites that are data centers. And that is kind of the middle step that gets them to that distant future where humans are living on Mars and they're able to generate most of their, their revenues and income from AI. It's not straightforward. And that has been a part of, like, how much you place a value of 2030-2050. Not right now, on historic IPO Friday.
- [14:13]
Kelly Leinz
Well, and it's also just so interesting to consider the circular nature of this, if you will, because we're talking about what Space X will need to do to deliver for customers like Anthropic, which. Yes, at least in some parts of the wider Space X business here, if you're considering grok, which obviously is. No, Claude, there is still competition there. Yes, just speak to that ad and how all of this is setting the stage for anthropic and also OpenAI's ultimate public debut that we're expecting later.
- [14:38]
Ed Ludlow
So state of play is that Anthropic has filed confidentially with the SEC for IPO and so has OpenAI Space X through its X arm. SpaceX owns X AI. It's a subsidiary, a wholly owned subsidiary of SpaceX did a deal with Anthropic where Anthropic pays SpaceX more than $1 billion a month to rent compute capacity from a data center, a specific data center that it built in Tennessee. On paper, if you read the prospectus and the vision that we just outlined, where SpaceX makes most of its money from selling AI software, that would make them, on paper, a complete rival and competitors Anthropic. But this is what's so interesting. A lot of phone calls in the last five days from existing SpaceX investors saying it's so important to talk about how they've done this. They have data center capacity that was available. They, you know, Xi and SpaceX, the parent, are very good at building data centers quickly and running them Operating them efficiently on a, on a very competitive dollar per token basis. So why not rent it out and make money? And that's the near term story that it, that will dictate right now the stock performance and the valuation because you know, the rest of it is so far away in another galaxy, etc.
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Kelly Leinz
Excellent pun. And that's of course as we consider the performance as a public company. But Ed, you were just talking about speaking to existing Space X investors. This is obviously not a new company. It's more than two decades old. It's existed in private markets for some time and there was a long time in which Elon Musk was saying we can just stay reliant.
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Craig Trudella
Yes.
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Kelly Leinz
On private capital. Walk us through that evolution and whether or not this is going to be a new model going forward as we consider more robust private markets.
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Ed Ludlow
Yeah, I think, you know, 2002, Space X was seeded about $27 million and the goal was to make a rocket booster land back on earth and be reusable. And now clearly, as we've just discussed, the story's really changed. In 2010 when Tesla went public, the company, the public company that Elon Musk is also CEO of, SpaceX, had a billion dollar valuation and rapidly kind of 2023 to 2025 in the private markets. Its valuation kept growing because it just dominated this business of launching payload to orbit. And then Starlink, which is a Internet service, but it's powered by a constellation of satellites around planet Earth, has very quickly become cash flow positive cash generator. So like you'll, you'll see all the Bloomberg stories and read the prospectus and say like how unprofitable SpaceX is and how distant it is, but in its connectivity business actually it's a cash generating part of the business. And so you know, it's just a crazy story we don't have. You could do an entire 24 hours on Bloomberg television radio to explain the history of it. But again, the point of the rocket business is that that next gen rocket, it needs to work for all that other intergalactic out of this world stuff to come true.
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Kelly Leinz
Well, I feel like Ed probably is going to end up spending 24 hours on Bloomberg television and radio today. You're working hard. Thank you so much. Bloomberg Tech co host Ed Ludlow.
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Chase Bank Representative
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