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The Exchange
SpaceX Soars in Trading Debut 6/12/26
00:49:26
Shares of SpaceX pop in the biggest IPO ever. We dig into what it will take to bring the company to scale, some of the key technological risks it faces, and what it will take for Elon Musk to maintain his newly-minted trillionaire status.
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- [00:01]
Venture Global Representative
Never bet against American grit or American energy through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
- [00:30]
Podcast Host (Schwab Market Update)
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update.
- [00:57]
Kelly Evans
Wherever you get your podcasts, you're listening to the Exchange. Here's today's show. A momentous day at the Nasdaq and at Starbase in Texas this morning with the SpaceX team ringing the opening bell of the biggest IPO of all time. Welcome to the Exchange. I'm Kelly Evans. SpaceX shares, well, they're trading around $174 this hour, just under that. After pricing at 135 and opening at 150 just over an hour ago, the company now has a valuation of over $2 trillion. That's more than Tesla, Metta, Eli Lilly, Wal Mart or JP Morgan. We've got every angle of this market milestone covered today. Sima Modi, Leslie Picker and Morgan Brennan are live at the Nasdaq and an all star panel of tech and market experts we'll speak to shortly. Sima, let's begin with you right in the middle of the action there.
- [01:57]
Sima Modi
Well, Kelly, Space X's first trade on the Nasdaq, it happened a lot sooner. Market was anticipating. The market makers here saw enough balance between buyers and sellers that they, along with the stabilization agents, felt it was ready to open at around 11:45am Eastern. Get this, about $17 billion of SpaceX shares changed hands in the first five minutes of trade. And the NASDAQ telling US now about 250 million shares have traded. That's about half of the size of the ipo. With three hours left in trade. Guys, the vibe check here. As you saw at the open a lot of energy, a lot of enthusiasm. Hundreds of SpaceX employees along with NASDAQ's executives convening around this IPO desk around me. And I met one Space X employee just in the last hour. He joined about seven years ago. His compensation was $150,000 with a lot of equity. Today, a big moment for him and his family.
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Kelly Evans
I read what is there, a couple a thousand or so millionaires as a result of the where the company is being traded today. Sima?
- [02:59]
Sima Modi
Yeah, that's exactly right. You know, it's one thing to read it, Kelly, but to meet some of these individuals who work in finance, HR IT engineers, who never saw this day coming and were told in November of last year that now they are going to take Space X public and all that equity that they had sort of stored in the back would now become a realization and something that they could use. Now, I was told by that same individual who works in finance, who has a lot of equity, that within two months he'll be able to start selling and realize some of those gains.
- [03:28]
Kelly Evans
I mean, I was struck by the, the interview that Morgan did with the woman who basically runs the company. And she said, yeah, she wasn't sure if they would ever go public. So here we are. They have, and it's in public hands. Yes, to a small extent now. Sima, thank you very much. Sima Modi, really appreciate it. Let's turn our attention over to Leslie Picker. She's at the NASDAQ now. But Leslie, you've had a busy morning to take a look at how this all came together. And let's remind everybody there was always the fear going into an IPO of this size and that it might not hold the IPO price, probably not in Tesla's case, but it's always a risk. There was that concern about the retail participation. So there was a lot of pressure on the teams behind the scenes to make sure this goes right. And questions still about to what extent they might be either supporting the trade or doing so in the days and weeks to come.
- [04:17]
Leslie Picker
It's, it's kind of remarkable, Kelly, because so much about this process was new and different. We really didn't know how today would turn out. They went to market, they went on their roadshow spoke SpaceX did with $135 fixed price, which typically for any IPO you'll see a range and you test demand within that range and, you know, $135 per share. They told investors, basically, you take it or you leave it. And as we can see from the fact that they kept to that price in the final pricing last night, and indicative of today's trading up about 29%. Investors basically said, okay, yeah, we will, we will do this at $135 per share. I was told in terms of the book, about 70% of it was long sovereign wealth funds. About 20% was retail and 10% was kind of smaller asset managers as well as hedge funds in terms of the banks themselves who operated this process. We did get a final prospectus this morning which showed the total fee pool being about $500 million. That was broken down based on the two co lead managers, Morgan Stanley and Goldman Sachs. They took the lion's share there, about 20% for each of those. That amounted to $100 million that Goldman and Morgan Stanley will be taking home. And you can see bank of America, Citigroup and JP Morgan taking home about 15% of that $500 million fee pool. And Kelly, you asked the question about how much is being stabilized. Usually the green shoe, which is the over allotment option, is only really stabilizing or pushing the stock higher if it drops in trading. So the fact that it's up about 29%, we don't know if it's been exercised at this point in time. If it and the shares are trading higher, it could actually mean that this company is able to raise about $11.25 billion more from this offering. Given the over allotment option and essentially the, the short that Morgan Stanley has. They sold more Shares. They sold 15% more shares as part of this green shoe. And if the stock is trading higher than the company just issues more in order to kind of COVID that. And that is how they generate about 11.25 billion in proceeds. So that's something to watch. And then of course, I believe we have this tweet showing, I think Elon Musk and the company thought the green shoe idea was very fun and they sent green shoes to the lead underwriters. You can see there, we saw it on the floor earlier today, everybody walking around and kind of their green shoes. Hopefully a good omen, I guess, to raise that additional capital as part of this deal.
- [06:54]
Kelly Evans
Leslie, how much? I remember 80 billion was originally the number going around. How much do you think they ended up raising overall?
- [07:01]
Leslie Picker
Well, they raised $75 billion as part of this offering. It was the largest IPO we've ever seen. The green shoe itself would add an additional 11.25 billion to that. Whether it's exercise today or they have about 30 days to do it remains to be seen. It's likely they will issue it if they feel comfortable with where the stock is trading. If it's trading higher, they most likely exercise that. But you know, I guess that's what, $86 billion total.
- [07:29]
Kelly Evans
Wow.
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Leslie Picker
For this IPO.
- [07:31]
Kelly Evans
And as you said just the 75 number was already, you know, the high mark. So more, more to come possibly. Leslie, appreciate it. Leslie Picker, we will leave you for now. Elon Musk celebrating the IPO and down in Texas. But Space X is president and CEO is in New York and she sat down exclusively with our own Morgan Brennan, who joins us now with the highlights. Morgan, I referred to one of them and the fact that she started at this company 24. How many people have worked with Elon Musk for 24 years? I mean she's extraordinary.
- [08:00]
Morgan Brennan
Not that many. But I will say the bench around Elon Musk in general at Space X is extraordinary. It is impressive. And you have a number of long standing employees including Gwen Shotwell and also the CFO Brett Johnson has been here a very at Space X for a very long time. You just mentioned green shoes. Green shoes are better than short shorts. Remember that when Elon Musk did that with Tesla. It's another historic launch for Space X, this time in public markets. You just heard it from Leslie. $75 billion raised. That's a record even before that green shoe is enacted, if it is. And yet the final book was so many times over oversubscribed. There was so much demand for this offering. So in the second exclusive and live interview with Space X President and CEO Gwen Shotwell earlier today, before trading started I might add, I asked about that decision to hold steady with that take it or leave it offering price and the size for the offering.
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Gwynne Shotwell
You know, not everything has to get done on the first day.
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Kelly Evans
Right.
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Gwynne Shotwell
I think there's lots, I think there's opportunity as we proceed down the path.
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Morgan Brennan
Okay, so you don't feel like you've left capital on the table when you see indications of 170 to $175 a share.
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Gwynne Shotwell
You know, the book that we set up that we've been working over the last couple of weeks is really a great book. We're really looking for investors that want to stick with us for the long term. And I feel really proud about what we've done.
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Morgan Brennan
So Shotwell, Musk and CFO Johnson, they've all been very clear in that message that investors should be patient. As Shot will explain to me in our first sit down that Space X investment thesis is really based on the future. But it's built on a track record of technological breakthroughs and subsequent commercialization that has happened in space launch with reusable rockets. It's happened in broadband with service from low earth orbit with Starlink. And now it all converges with AI. So I asked Shot well whether as some reports have suggested that the first orbital AI data centers could be deployed as soon as next year, which would actually be faster than what was forecasted previously.
- [10:06]
Gwynne Shotwell
I think we'll be launching the full AI1 satellites late next year, but we will be putting compute on some of the Starlink broadband and the Starlink mobile satellites prior. We want to make sure we understand the operation. We love doing kind of canary sets and canary work before we fly the real thing.
- [10:22]
Morgan Brennan
Well, so all of the content, both of these exclusive sit, sit down interviews with Shot well, as well as an inside look at that starship rocket factory at Starbase in Texas where Musk and the rest of the Space X workforce are today. It's all online@cnbc.com go take a look.
- [10:39]
Kelly Evans
I encourage everyone, Morgan, the piece that you wrote, just recapping all of this, including her comments, but kind of reminding everyone the scope of what the company's doing right now, it answered all of my questions. I mean, I think if I'm remembering correctly, they have 9,600 satellites orbiting Earth right now. In order to kind of provide Starlink, they're doing what was it like a rocket launch a month. And it was like 80% of the rocket launches are on these using these reusable rockets. I mean there's so many fascinating stats in there that really do tell you how far the company has come.
- [11:10]
Morgan Brennan
Yeah, well, and the Falcon 9 fleet, we actually saw a launch one another Starlink launch on a Falcon 9 this morning before the opening bell too. So we're now higher than that. 9,600 Starlinks deployed on orbit number. But in terms of the starship rocket, this is one of those metrics I asked Shot well what investors should be watching in terms of metrics to realize this future that's been laid out by the team there. And one of the things she said is pay attention to Starship and Starship. Is this next generation ultimately going to be fully reusable rocket that they are building down at Starbase? They just did a successful test flight a couple of weeks ago and what she had told me was that that cadence is going to ramp up to monthly flights here. And just, just to give you an idea of how much is under the hood at Space X. I mean the manufacturing prowess and what goes into that. They are currently turning out one starship rocket and spacecraft a month and she wants to get that, get that down to two per week. And when you see all of that happen, it's going to drive launch costs even lower. And that's what's going to enable AI, you know, satellites in space and all the rest of it, including ultimately colonization
- [12:19]
Kelly Evans
on Mars as tall as the space Statue of Liberty. But I have not been to a launch. So again, trying to imagine just the scope of what's undertaken is really something. Morgan, thanks for bringing us all of that.
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Morgan Brennan
You got added to the bucket list.
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Kelly Evans (continuation)
Yeah.
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Kelly Evans
You know, a wise person once told me, whatever's on the bucket list, just do it now. So I guess got to make it happen. Maybe in the next couple of years. Morgan, thanks, Morgan. Brennan, let's bring in Jim Cramer now. He's the host of CNBC's Mad Money. Of course, Jim, the stocks at the highs of the day.
- [12:49]
Jim Cramer
Look, this was beautifully done. It was an A plus. Everybody involved did a terrific job. The two book runners, retail for Morgan Stanley, Institute for Goldman. They're superb. I've not seen a deal done as well as this one that I can recall. I'm sure, obviously Elon Musk had a great deal to do it. That would be wrong not to say that, but really perfect. Kelly. It's just, just a fantastic job. I've said that. I thought it could go up to 2.5 trillion. It might do that. But you got in at a good price. People who want to buy more, who got in are going to have a very good average. It's really just very well done.
- [13:27]
Kelly Evans
You know what, I was struck by Jim and CBC again. I feel like I'm giving out too many shout outs today. But they have this great piece talking to a lot of retail investors in the ipo. And the hilarious part of it was almost all of the retail investors acknowledge, yeah, it's probably overvalued in the short run. Yeah, the valuation is high. But they all have this sense of kind of wanting a piece of this for the long run, you know, I know there's also a lot of people who just wanted to be in for the first day IPO pop. So we'll see whether they can kind of hang on for the longer term because can you imagine what this company's quarterly results are going to be like? And Gwynne Shotwell talked to Morgan about this. They don't care. That thing could be up, down 80%. It's going to be a mess. Right. For a long time. So, you know, but that's okay.
- [14:07]
Jim Cramer
You can buy more. My friend Brad Gerstner said a lot of really good things about what the actual deal means. I feel like that in some ways we're losing everywhere against the Chinese, or at least the press makes us feel like it. But we're not losing in space. We're not losing in space because Elon Musk has a vision. You're allowed to buy a piece of what Elon Musk is doing. I'm very proud. I think that at a certain point I'd like to have it for my child. Trust. It's. I talk about it so I can't. But you know, Kelly, sometimes deals. Are you done? And they really pop just as much as they should and they attract people. It's not outrageous, it's not cerebrous, it's not figma. It's just a very good deal, very well priced and people who want to buy it I think should absolutely go do it. So there's nothing embarrassing about it. There's always a couple of people who, they're kind of house bears and you can dig them up and they're going to come up with a lot of negative things. But I've been seeing that since I got in the. I walked down Wall Street 44 years ago when the Dow was at about a thousand and the same naysayers, some of them are still around, but we got new naysayers, they kind of do the same thing and they've kept people from being wealthy and their jobs, the people who have the regular jobs, that would never make them wealthy. I feel like we want to encourage wealth and this one is only going to make people a lot of money.
- [15:25]
Kelly Evans
Do you think though, Jim, that people are going to have to think really long term about, you know, when you buy it at two, two and a half in the valuation. We look at Tesla, its market cap hasn't moved around all that much in recent years. So, you know, buy it, own it, put it away, whatever. But I guess that's what I mean. I expect there to be quite a lot of volatility in the near term. It might take a while for this one to really be, you know, a massive wealth builder.
- [15:47]
Jim Cramer
Well, you know, Kelly, the Chinese targeted robots and they targeted cars. And when the play and the Chinese government get together, they can really wreck a lot of industries, as many working people in our country know. I think that Elon Musk will not, will not tolerate that. And so therefore I think that we're going to own space. This is a person who uniquely understands how important owning space is. And I think that I want to be with him. I don't care, you know, and by the way, he has things in his head right now that are probably far more valuable than what we see and just hasn't articulated. That's the same thing that Jensen Wong, another genius did. He had a lot of things in his head that hadn't been fully articulated that have been all coming true. I think there's more to this company than what's in the prospectus and I think that. I don't know personally I'm proud, proud to be an American today. I know it's to be reflective is sound almost silly because we're talking about pieces of paper but I think this one is more than a piece of paper. I think this, this reminds me very much when we landed on the moon and I realized that we had beaten the Russians. And at that point, I know it sounds hard to believe but the Russians in the press were supposed to be beating us in everything and every part of technology. And we run that. We won that race and something changed in our country where we believed that we were superior. We've since we since then of course fell back and believed that the Russians were superior again. There's always some people who I guess are supposed to be superior. But right now, today we are.
- [17:14]
Kelly Evans
Well 17652 is the high so far with just a couple dollars off that.
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Jim Cramer
I don't want it to be that much higher. I want people to be able to get in and not feel like they missed the opportunity. It's so different from Figma, it's so different from Cerebras and by the way the same people were involved but they really learned a lesson. They did a good job. Congratulations to both these firms. They don't hear enough good. They usually are, are, are hectored. Even in ads that I see they're hector Goldman Sachs partners. Make fun of them. Having worked at Goldman. You know what, I'm not making fun of anybody today.
- [17:44]
Kelly Evans
Jim, really appreciate you joining us.
- [17:45]
Jim Cramer
Thank you. Thanks for having me on.
- [17:47]
Kelly Evans
Thanks so much. Jim Cramer over at the New York Stock Exchange coming up from the largest IPO in history to now the sixth largest US company by market cap. We're talking about Space X of course makes them bigger, bigger than Broadcom, Tesla, Metta or Micron. What impact will it have on the markets broadly and on the IPO pipeline line? That's next. Plus a C suite view of SpaceX with former Honeywell chairman and CEO Dave Cody. What will it take to scale the company coming off the largest IPO of all time? The exchange is back after this.
- [18:19]
Podcast Host (Schwab Market Update)
This is the exchange on cnbc.
- [18:27]
Venture Global Representative
Never bet against American Grit or American Energy through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
- [18:56]
Discover Representative
It's smart to always have a few financial goals, and a really smart one. You can set earning cash back on what you buy every day. And with Discover, you can get this Discover automatically matches all the cash back you've earned at the end of your first year. Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show see terms@discover.com credit card this episode is
- [19:22]
Podcast Host (Schwab Market Update)
brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com Market Update podcast or find Schwab Market Update wherever you get your podcasts.
- [19:51]
Kelly Evans
SpaceX is now the largest IPO in history. The near $75 billion fundraise is more than double the previous record from Saudi aramco back in 2019. For more on the sheer size of the listing and the implications now, let's turn to Dan Primack, Alex Cantrowitz, and Simeon Hyman. It's great to have you all here, I guess. Simeon, I'll start with you. You're sitting right across from me. What are your thoughts and reactions now? The companies in the markets at a roughly $2 trillion valuation and the IPO price is probably meaningfully above what a lot of people are expecting.
- [20:22]
Simeon Hyman
The one thing that I don't hear much talk about is the fact that we're playing a little catch up here. IPO volumes are still substantially below where they were in 2020 and 2021. Now we know we had SPACs back then, but still there's there's room here and of course we can't even call it incubation. But the much longer period that companies are playing are staying private has left some real room for catch up here and I think that's part of what we're seeing.
- [20:46]
Kelly Evans
You're with ProShares, obviously, global investment strategist there. Tell me about these kind of levered funds. What role are they going to play?
- [20:52]
Simeon Hyman
We expect to be trading on Monday with spcf and that's going to offer two times the daily performance of Space X which is just a very convenient way folk for folks to get more exposure, less cash. You don't have to worry about a margin call and you buy it with a ticker. And I think if you combine the quick avail, the quick inclusion in the indices, the passive demand is going to be there. The stock itself and the levered opportunity, you got three very powerful legs of the stool for the ecosystem be trading very robust.
- [21:22]
Kelly Evans
What are your Most popular levered ETFs right now?
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Simeon Hyman
T triple Q is always, you know, at the top of the list. Very often it's the highest volume security. That's 3x the daily performance of the Nasdaq. But we also have have a suite of single stock ETFs as well. The largest of those is CRCA on Circle.
- [21:41]
Kelly Evans
It is the largest is on.
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Simeon Hyman
That is on Circle still with the
- [21:44]
Kelly Evans
crypto winter and everything that's been going on still see if SpaceX surpasses it then. Dan Primack, what are your thoughts?
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Dan Primack
My big thought he just said there's room to catch up. My big thought is this went so smoothly, as Kramer said earlier, there's now a playbook. But I write they may raise more, they may raise less, but they're going to be similar in terms of size, in terms of valuation probably and in terms of the amount of money raised. And a big piece of that was start early. Right. SpaceX and Goldman started talking to investors back in January, kind of testing the the waters and had to keep talking to them. Right. Because things kept changing. The X acquisition, the quasi acquisition of Cursor start early and keep telling the story. And I think given that you've got a lot of the same banks, obviously they're going to be involved next time. We now have a playbook. And because things just went so smoothly also including the exchange, remember one of the last times we had a huge NASDAQ IPO was Facebook. That was a disaster from a technical active. Right. Things didn't work. This has worked swimmingly so far. Kind of regardless of the price.
- [22:43]
Kelly Evans
It opened much sooner I think than a lot we're expecting. Dan is an important part of the success story now to have direct retail participation. Do you think they would keep that aspect for Open Air, Anthropic and others? They may.
- [22:54]
Dan Primack
I mean look, Elon has kind of an affinity for retail in general, both because he's got this massive fan club. He also has some retail businesses. Right. Tesla is essentially a retail business and I know retail sales and retail Shareholders aren't the same thing, but he has a. He kind of has an affinity toward that. But I wouldn't be surprised. Again, given that this worked well, I don't see any reason why those companies wouldn't do the same again, considering they will probably raise either the second and third largest IPOs in history or the first and second.
- [23:24]
Kelly Evans
My counter to your point, Dan, might be that in a weird way, although Elon Musk himself can be a volatile person, Tesla as a company has, is become kind of a trusted known name at this point. I mean, it's held its valuation for many years now, again with a plus or minus of, you know, 40% in any given year. The point being Those other companies, OpenAI in particular, probably carry less. I don't know, I mean, they're more unfamiliar to, to the public and they might not have that retail interest that kind of gave it an extra source of curiosity. So I would wonder if in that way we can't necessarily think that it would be able to be as smooth as this one.
- [24:04]
Dan Primack
I don't think they have the devotion to the founder that Tesla and Space X has.
- [24:09]
Peter Haynes
Right.
- [24:09]
Dan Primack
Again, this, this just group of people who will follow Elon everywhere. In terms of name recognition. I mean, I haven't looked at the latest, you know, polling probably on this. I think most people know what Open Air is. I think it's probably one of the biggest brands in the country at this point, despite being relatively new. And even Space X, you know what Space X is today, In June of 2026, space isn't even what it was six months ago. Right. With the XI integration that, you know, originally it was really kind of a launch business in Starlink and it has changed completely. I still think Starlink's the most important piece of the business, but it has changed a lot just in the past six months. Who knows what Open Air will be in six months from now.
- [24:46]
Kelly Evans
My final comment on that is I can't imagine. I thought what Jim said about Space X was in a way so important, and I can't imagine him having something similar to say about OpenAI. I mean, most people, whether it's retail investors, I mean, they're not standing up there going, you know, maybe they say, I'm glad we're winning in the air race, but I don't think they're going, you know, it's so great that Jim's
- [25:05]
Dan Primack
got a space thing, but remember the.
- [25:07]
Kelly Evans
I think we all do that. We know, we know it's strategically important and it's hard to do and it takes capital. And here's someone kind of doing it against the odds. I'm not sure there's the same emotional connection, except maybe in a little bit of a. Of a scary way to chatbots.
- [25:21]
Dan Primack
There may not be, but I don't think there's an emotional connection to Nvidia either. And granted that's not an ipo, but
- [25:25]
Kelly Evans
look where it's trading.
- [25:26]
Dan Primack
I mean, I don't think anyone has an emotional affinity for chips.
- [25:28]
Kelly Evans
Yeah. Let me. You could name the other Mega Caps to the kind of a blessing and a curse reputation to them. Alex Cantrow, it's. You want to weigh in on that question?
- [25:37]
Alex Cantrowitz
Yeah. I think what Space X has done today is really dip into the pockets of OpenAI and Anthropic. Of course, those are the two IPOs that are coming. They'll be a trillion at least. And what Elon's done is he's gone out ahead with an AI story. If you looked at the total addressable market that Elon was talking to, the market, about 28.5 trillion, 26.5 trillion of that is artificial intelligence. And like Dan said, there was no artificial intelligence play within Space X a year ago. The company, even xi, was floundering with Grok. Grok wasn't really working very well. And then all of a sudden, before the IPO window hits, it inks this deal with Google at 30 billion and anthropic with 50 billion and all of a sudden has a credible story that it's taking the market with an IPO that was. That was money that probably would have otherwise gone to an OpenAI or anthropic. And now it's going to Elon.
- [26:27]
Kelly Evans
Alex, what else would you add in terms of. The company has. Now it's. It's in the public markets. Some have wondered whether it's taking capital away from some of the other Mega Cap names over the past couple of weeks.
- [26:40]
Alex Cantrowitz
Well, I would say, you know, this is just the beginning. Right. And even though Space X is a story stock right now, you know, its earnings are going to be much lower than any company in the echelon of valuation that it has. It's going to eventually have to back it up. Maybe not, you know, this year or next year, but at a certain point, the numbers are going to have to be there. And again, I think its success will ride with the Air Wave's success. If AI goes according to plan, then Space X will have, you know, a credible stake in the, in the winnings there. But if it doesn't you're going to look at this big story that it took to market. It's going to be a communications business with Starlink and a space business with the space launch activity within the company. And it's just not going to measure up to the promises today. So again, this is the beginning, not the end. And we'll have to wait and see about the performance on the market.
- [27:26]
Kelly Evans
Absolutely. Simeon, what would you sort of add
- [27:30]
Simeon Hyman
in the, in the context of this is the biggest IPO ever, I think it's easy to forget that only a tiny, tiny piece of this company just went public. So if you keep that in mind, it's in everybody's best interest for not only today to go well, but for there to be legs to the story.
- [27:45]
Kelly Evans
It's a perfect segue to our next discussion. Dan, Alex and Simeon, thank you. Really appreciate it. Appreciate all of your time. If you hold an ETF like the VO from Vanguard or BlackRock's IBV, in other words, the broad kind of market, you'll be waiting until mid-2027 for Space X exposure. And that's because the S and P refused to adopt a fast track rule for massive IPOs like the NASDAQ did. Our next guest says he doesn't agree one iota with S and P decision here. Let's bring back Peter Haynes. He's the head of index and market structure research at TD Securities. Peter, great to see you again. Explain.
- [28:23]
Peter Haynes
Well, we got to step back and say what's the purpose of an index? Index is there to represent the market and a particular segment of the market, in the case of the s and P500, is large caps. And as you mentioned, and as your previous guests were talking about index inclusion for Space X, it is accurate to say that Space X will be included in almost every important US benchmark except for the S&P 500. And that is because S and P, I would say, shockingly decided not to follow the consultation that they gave to the street which had suggested they would allow the mega caps like Space X into the index index within six months or be eligible for the index within six months. What I don't like about that decision, first of all, I would have actually looked for it to even happen faster than that. And what I don't like about that decision is, as you say, it's now at least one year. But we also still have a rule that says that companies at being included or eligible for the 500 index have to be profitable. And it could be some time before any of these large mega IPOs that we're talking about that have huge valuations may be profitable and those names will sit on the sidelines and not be part of what is arguably the most important bellwether benchmark in the U.S. yeah, that said, Peter.
- [29:36]
Kelly Evans
Look, if they didn't have some kind of vetting process, they don't need to exist. You can just have it be an automatic thing. The other thing though that I was going to mention is we don't know after today what happens. This company and Gwen Shotwell alluded to this herself, the earnings could be messy for a while. I mean, it could end up being down for 40% after a couple of bad earnings reports where people are reminded that this is still an early stage company in highly volatile businesses. So if all of a sudden six or nine months from now we're 30 or 40% below where we are today, I don't think anyone's going to be complaining that it's not in the s and P500.
- [30:10]
Peter Haynes
It is accurate to say that if we are in that position three or four months from now, people will say I'm glad it's not in the index. But let's understand that they're making a bet in saying that. And that's not the job of the index provider. In my opinion. S and P is making a huge bet against what is arguably very valuable companies. The market is pricing these stocks, whether you agree or not, at trillion dollar companies and not including them in the primary benchmarks that cover that segment of the market for an extended period of time is, in my opinion, not the right decision. To the point about the index provider, it's. I have a lot of respect for the index providers. I think they did a great job. And S and P asking the market what would be the right thing to do here. But in the case of S and P, there's already a significant number of companies in their 1500 indices, the 500, the 600 and the 400, that are not profitable. They may have been profitable temporarily when they were included, but they're not profitable now. And what this does is it does set up for an opportunity because the profit tests exist for a merger to take place. And when you move different segments within the 500 to 600 and the 400, you don't have to be profitable. So I do think that profit test is a little bit outdated and would argue again that these are very large companies and they won't be represented in the benchmark for some time. And I think that's a mistake.
- [31:28]
Kelly Evans
One, one final piece of pushback. I appreciate, I want to continue having this conversation because it's not going to be just them we're talking about either on this. But to me The S&P 500 is also largely a vehicle that goes into retirement plans and retirement accounts. And these are people building wealth over years, if not decades of time. Also, you can still go buy Space X if you want to. Now literally anybody can go do it. I think the bigger concern would be degrading the quality of the S&P 500 because there's too many companies that aren't profitable enough to support a market cap they might get for whatever reason. So for me, from a very long term point of view, given the exposure people have to literally being able to provide for the themselves in the future, I don't mind a little bit of a wait and see period.
- [32:11]
Peter Haynes
Well, Microsoft took eight to 10 years to get in the S&P 500. And you think back to Microsoft, would we have made that decision of taking that long to get that stock in the index back when it was added in the 90s? I think we're making a bet here. S and P is making a bet here and it's their right. They are arguably the largest active manager in the world because they have an index committee that decides that Marvell and Flex should be the two stocks added to the 500 next week, which they've done. And those are subjective decisions. They have rules and they make decisions. So I respect the fact that they are going to stick by their rules. I don't agree with it because I think they're making a big bet.
- [32:46]
Kelly Evans
All right, Peter, I love hearing your point of view on this. Thanks. And again, the smoothness so far I think has to some extent made your point, but we still have a little ways to go. Thanks for joining us once again, Peter. Peter Haynes with TD thank you very much. Coming up. So SpaceX went public. What now? Former Honeywell chairman and CEO Dave Cody is here with his take on what it takes for a company as it looks to scale the business. And as we head to break, Space X is now the sixth largest company by market cap, behind in Video, Alphabet, Apple, Microsoft and Amazon. There you can see it just at the top right of your screen. Valuation of $2.2 trillion puts it ahead of Broadcom, Tesla, Man, Meta and Microd. More after this.
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- [34:51]
Kelly Evans
We've heard a lot of talk today about how Space X is more than just rockets. Number of different businesses, actually. And what will it take for the company to go from the capital raised today to build out the conglomerate it hopes to be one day? And how does it avoid making the wrong moves? Let's ask someone with firsthand experience, former Honeywell CEO Dave Cody. He's now the executive chairman of Vertiv, which specializes in powering and cooling data centers. It's so great to have you here. Appreciate you making the time.
- [35:17]
Dave Cody
Very nice of you. And I love you using the term conglomerate. And it's not a pejorative. It actually can be a very good thing. So thank you.
- [35:25]
Kelly Evans
And maybe that's the place to start because we were speaking about this briefly the other day, but your point was a conglomerate kind of by definition should exist if it outperforms the S&P 500 we're just talking about. So do you think that's kind of the benchmark for now?
- [35:38]
Venture Global Representative
Yeah.
- [35:38]
Dave Cody
You have to. You have to outperform because otherwise the investor argument that, hey, break it up into sectors, let us choose the sectors, because you obviously can't outperform. So let us take a chance of doing it. But if you have a conglomerate like we did at Honeywell and like what we're building at GPGI, that can outperform the S&P 500, well, now you're doing better than about 80% of investors. You definitely have a right to exist.
- [36:02]
Kelly Evans
And it's hard to do. It's really hard to outperform.
- [36:04]
Dave Cody
Yeah, well, that's where the fun is. Being able to do that is where the fun is.
- [36:07]
Kelly Evans
So look again, these companies are hardly on autopilot. I think Musk makes that super obvious. There's lots of speculation about whether Tesla gets folded into it or not. You know quite a bit about aeronautics and the satellite business and so forth.
- [36:21]
Leslie Picker
Do you have any.
- [36:21]
Kelly Evans
I mean, do you think that this is all. We saw Jim Cramer's reaction earlier. I mean, it is quite a moment in many ways, but it's also a lot of challenges. I'm just. What are your thoughts and reactions here to, to the IPO and the share price and now its entry into, into the public markets?
- [36:36]
Dave Cody
Yeah, I probably ought to put my judgment on companies like this into context because it was about 12 or 15 years ago, I was watching CNBC and saw that Tesla had a market cap of 28 billion and I thought, oh man, that's a shot if I ever saw one. It's over $1 trillion.
- [36:55]
Peter Haynes
Exactly.
- [36:56]
Dave Cody
It shows what I know.
- [36:56]
Kelly Evans
You are hardly the only one. By the way, all of us have expressed skepticism about some of the. And I was going to ask about the comp too. I mean a lot of the executive comp is tied to these incredible performance benchmarks. This one may be a little outlandish with Mars, but Musk got into a lawsuit because he hit his performance benchmarks of Tesla. I mean that's the craziest part of the story. They set them so high and he hit them that they had. These payouts were enormous. So, you know, if anyone has to some extent proven the doubters wrong, he has.
- [37:25]
Dave Cody
Oh, absolutely. And that's. So I look at the numbers now and any, any of the like discounted cash flow work anybody does, you go, okay, this just doesn't make any sense. But he has this incredible ability to actually really turn it into something. And yeah, he gets paid a lot, but he's generated a lot too, not just for his investors, but what he does for the economy. So all the more power to him. I'm rooting for him. I hope he's successful. I love seeing spaces of frontier that we're attacking a lot more aggressively than we did in the past. We had a 40, 50 year hiatus where we really blew a head start that we'd had for a long time and just kind of went into this nadir. He's reinvigorating that the stuff that he's doing, Bezos, I mean, I love seeing it.
- [38:10]
Kelly Evans
They said, according to one of the guys we were just speaking with that they might try to get data centers out there in space in the next year or so and that you sure that's not something that, you know, Vertive needs to work? I guess Vertiv could be involved. Well, you don't need to call them if they're out there. But I know you said earlier, which is, look, there's going to be tons of market, you know, for everybody out there, but does there become a point in which the saturation and the valuations for, for the infrastructure build out? We start to say, okay, maybe this needs a little bit of a cooling off point.
- [38:41]
Dave Cody
Cooling off. Interesting choice of terms with the. So a couple of questions in there. One I would say is this an AI bubble, which it's been the shortest bubble in history because four months after it theoretically started everybody was talking about is it a bubble? The reality is we're only like 40 years into the digital age, industrial age, 100, 150 years. We're only 40 years into this one. It runs on data and processing data. So you've got to store it, you got to process it. Even quantum computation requires digital storage of data in order to draw on it. This is not a bubble. This still has a long way to go. And data centers are going to be fundamental to all of it when it comes to data centers in space. Interestingly, while it is cold out there, it doesn't cool the chips because it's in a vacuum. So you have to come up with a different way of still cooling the chips because they still get hot and will stop performing at some point. So that is one of the things that has to get figured out. And yes, we are involved with this. The other big thing that's going to get have to get sorted out is how do you service a problem. So whether a solar panel gets hit, some of the mechanical equipment stops working, the server doesn't work anymore for some reason. Today it's easy. The service guy goes in, can switch out a server, fix whatever. So you'll need a lot of like super redundant systems or failure proof or automation in order to fix things or figure out how to get service people to go up to space and fix stuff. So there are things to sort out, but I think it's an exciting prospect and we're involved. So I'm all in favor of it.
- [40:15]
Kelly Evans
Yeah, it makes me think maybe, maybe it really truly is the next frontier. I myself was chuckling at the headlines a year ago about data centers in space and now here we are. I listen to you and I go, yeah, I guess we're going to have to solve all of these problems. It's going to take a lot of investment. Maybe there are other companies that are going to come to the markets with the capital or startup. I don't know if you've evaluated any of these or if they're, you know, if that pipeline looks healthy, but that this is kind of what could begin this. And it takes a lot of. This is not the software age. I mean, you used to be able to, you know, start a SaaS company with a couple of people and like a good enterprise product. This is very different.
- [40:47]
Dave Cody
Well, again, there's two aspects to this because one is there is software involved. So you've got the kind of the agent companies, but they all have to use data and the data has to be stored and has to be processed. And right now data centers are the only alternative. And AI is just the next step in the digital age transformation. There will be something after AI. I don't know what it is, but there will be something because we're just so short tenured into this digital age era. So there's a lot more to come here.
- [41:18]
Kelly Evans
Here are we. Are you comfortable with our position vis a vis China in all of this?
- [41:23]
Dave Cody
I would say yes. I do think that we're ahead overall. It scares me when everybody, it's like they kind of put their dunce caps on again and want to break the weaving looms as opposed to saying push back on. How do we, yeah, there's issues to resolve. Energy, water, that kind of stuff. But let's focus on how do we address it, how do we find, fix it so that we can really take off with everything we're doing instead of everybody just whoa, whoa, whoa, whoa. You know, let's wait and figure this out, man. That's the wrong way to approach.
- [41:53]
Kelly Evans
Send them to space. I mean, is that the kicker here? Can, I mean, can we. Can communities and states say, look, he's going to solve this, we're going to be able to literally outsource them. We don't have to.
- [42:02]
Dave Cody
Can't wait that, that line. I mean, who knows how long this takes to sort out And I don't know that. But in the meantime, the race is on now and it would be a significant mistake to do anything to halt it or impede it in some way.
- [42:16]
Kelly Evans
David, it's been great to hear from you. Kelly, thanks so much for making the time. Really appreciate it.
- [42:20]
Dave Cody
Happy to do it.
- [42:20]
Kelly Evans
David. Cody, we've got some Breaking news out of Washington. Eamon Javers, what's happening?
- [42:25]
Eamon Javers
Kelly A senior administration official just finished briefing reporters here in Washington taking some questions about this deal with the Iranian government that is coalescing behind the scenes. This senior administration official saying that as of this morning he would have been only about 70% confident that a deal is coming together. He said now as of this hour, he is 80 to 85% confident that a deal is going to come together. But he's cautioned to say that although he feels very good about this deal, the senior administration official saying we are not quite at the finish line yet. So the administration with this call, trying to sort of take the initiative here and push back on some of the leaks that we've seen from the Iranian side about what's actually in the deal. The senior administration walking through a couple of specifics on that point. One of the issues is removing the enriched uranium and nuclear material from Iran. The senior administration official said that point, the technical aspects of that point haven't really been worked out yet. He said how you do that is going to take a little time to figure out the technical details. You know, he said we're just not going to go down there with a backhoe and dig it up. So it's going to be a process. But he said ultimately he's confident there's a commitment to do that. And the official saying in terms of the Israeli government, which has been one of the trickiest diplomatic issues in all of this, the president did speak to Bibi Netanyahu about this yesterday. The senior administration official saying, asked if the supreme leader had signed off on this in Iran, saying that we could take the commitment of the civilian and military side in Iran, who have attested that he has. So a lot of blank spaces in terms of the specifics of the deal. But the US Administration really demonstrating on this call that this is going to be what they call a performance based deal in which the US doesn't give up anything on signing of the deal and it will be done over stages so that if the Iranians live up to their commitments, then the US Will live up to its commitments. So think of that in terms of economic commitments from the US that will be triggered at certain points along the way.
- [44:35]
Kelly Evans
Kelly we could be closer to the point at which we really feel like this is a done deal, especially with some big milestones July 4th and otherwise looming. Eamon, thanks.
- [44:46]
Eamon Javers
He said there could be a signing ceremony in the coming days, but they don't have a location worked out just yet yet. So still some, still some pieces of the puzzle coming together.
- [44:53]
Kelly Evans
I love that piece of intrigue. Eamon Javors in Washington. Coming up, the Space X IPO is minting Elon Musk as the world's first trillionaire. We'll look at what it will take to keep him there next. And while Musk added another comma to his net worth, retail investors are looking to do the same today. As we head to break, here's what some of them told CNBC.com ahead of today's debut.
- [45:14]
Discover Representative
It's unreasonable, to be frankly, honest with you.
- [45:17]
Kelly Evans
The valuation is really, really aggressive.
- [45:19]
Eamon Javers
Never bet against dvad.
- [45:21]
Kelly Evans
For me, this is a long term investment that I'm hoping to hold not for a week or a month or even a year, but, you know, the next 10 plus years. I am agnostic.
- [45:31]
Dan Primack
I don't really care if the stock
- [45:33]
Kelly Evans
goes up or down because I'm a trader.
- [45:35]
Kelly Evans (continuation)
I will make money on volatility.
- [45:41]
Kelly Evans
Elon Musk is now the world's first trillionaire. It was hard to say with a straight face, but he is. CNBC wealth editor Robert Frank has done the math. Robert, I love how we're already concerned about whether he can stay a trillionaire, but, but basically he's the first person whose ownership of everything that we know adds up. He'd have to sell it all to like real, but he is technically today a trillionaire.
- [46:01]
Robert Frank
Yeah, I've been covering wealth, Kelly, as you know, for more than 20 years. I didn't think this day would ever come. So it's to going kind of amazing. Let's walk you through the math of how we got there because Elon Musk is now a billionaire a thousand times over. Space X shares trading at about 170 bucks now. So that would make his stake in the company worth around $870 billion. He owns 39% of the shares in SpaceX, controls about 80% of the vote. His wealth now from SpaceX Space X is more than three times his Tesla wealth. So based on Tesla's current trading price that Tesla wealth Now at around $280 billion added all together. Elon Musk is now worth over $1.1 trillion with a T. That is more than the next five richest people in the world combined. Elon Musk is now worth more than five the next five richest billionaires in the world combined. And his personal fortune is larger than the GDP of Sweden, Ireland or Taiwan. Today's IPO added more than $300 billion to his net worth. So just today he added more than Jeff Bezos. His entire net worth, the Space X ipo also creating thousands of new millionaires who are employees of the company and took well below market salaries for years in return for stock. For more on the millionaires and billionaires being Created by the SpaceX IPO and how they're investing, you can sign up for the Inside wealth newsletter at cnbc.com/inside.
- [47:32]
Kelly Evans
Well, what's so amusing about. I mean there's so many things but there are going to be people, rival billionaires. You know you mentioned Bezos or whatever looking at this and going but the company lost $5 billion last quarter and this makes him a trillionaire. So my only question is for those who are following along, what are the numbers where he drops below the trillionaire status?
- [47:50]
Robert Frank
I mean at 135 he was at $980 million. So, so it basically and that presumes that Tesla stays where it is right now. So those who are worried about maintaining that trillionaire status, that's where it get. But, but even there he's worth seven Warren Buffett's. It's, it's hard even at a billionaire level to, to fathom the wealth that this represents.
- [48:18]
Kelly Evans
And again and because this is a time when people want to come after wealth, I think it's just, just important to reiterate if you want access to any of that wealth you have to either sell shares effectively you get the money but you lose, you know, the future. Well there's tax so I know they're all borrowing against it doesn't really matter the number.
- [48:35]
Robert Frank
And Elon had borrowed against this basic shares. He, he somehow relinquished most of those loans. There's a small portion of stock that he still has pledged as collateral but basically these aren't leveraged shares. So you know he, he hasn't been a seller often. He did that one big slug of Tesla stock back in 2021. But he's someone who holds on to these stocks. He doesn't cash out a lot. He tends to borrow a bit. Yeah but he is going to be a long term holder of both these companies. And I bet we'll continue.
- [49:04]
Kelly Evans
We need a new song because now you want to be a trillionaire. So Robert, thanks very much.
- [49:08]
Robert Frank
Thank you guys.
- [49:09]
Kelly Evans
Meantime, Oppenheimer was one of the first firms to start coverage of Space X. They rated it out for perform with a 190 price target. They're bullish on the diversified portfolio and the long term growth opportunities. While warning of a few key risks. I imagine Musk himself is one of Them. Let's ask Oppenheimer's Tim Horan. Tim, it's good to see you. And 190 yesterday looked like more of a stretch than it does today, that's for sure. Where based on the sum of the parts, do you come up with that valuation?
- [49:39]
Kelly Evans (continuation)
Well, we did a 10 year DCF on it, but really need to do more of a 15 to 20 year DCF. I've just, you know, never done one of them. But it's trading around 8 times 5 year out revenue which is kind of. Most cloud companies kind of trade in that eight times range or most hyperscalers I should say.
- [49:56]
Kelly Evans
So this, there's, like I said, there's so many amusing parts to this. But I love how you're saying in order to get to this valuation you had to do a 15 to 20 year discounted cash flow that you've never.
- [50:09]
Kelly Evans (continuation)
I did a 10 year to be to be fair. But you can get much higher price targets if you go out to, you know, 15 or 20. But this is going to be an extremely dynamic company. I mean what he's done in the last six months are just mind boggling. I've been following the company for three years but he has totally transformed this company to be an AI company within six months. And I can't imagine what else is going to happen the next year, but it's going to be dynamic.
- [50:33]
Kelly Evans
All right. So, so quickly like kind of add up the market cap for me. How much from AI, how much from space, how much from Starlink.
- [50:42]
Kelly Evans (continuation)
I didn't do with some of the parts that way to be honest, this is going to be a pretty well bundled service. But we do think when I first started buying the company three years ago, we thought the communications business could be worth a half a trillion. And now I'm up at a two and a half trillion valuation. I think the communications went to roughly a trillion the space business and I will AI is a trillion trillion and a half longer term. But this really is about being a vertically integrated AI company at this point it probably is going to represent 70 to 80% of the valuation.
- [51:13]
Kelly Evans
And how would you compare? I mean what are its peers?
- [51:18]
Kelly Evans (continuation)
So I've been doing this a long time. I think the closest thing I've ever seen to anything like this is Google from 20 years ago or maybe Facebook. Facebook or Apple. But this is really an infrastructure company that has the best infrastructure, will have the best infrastructure for AI compute, the best infrastructure for communications and ultimately the best applications on top of this. This is basically the only vertically integrated AI company out there combining this incredible infrastructure with incredible data and incredible hopefully longer term AI applications. And you know, this is just one of these once in a generation type company.
- [51:56]
Kelly Evans
You do cover a few of the other space names, the publicly traded ones. And would you even consider them rivals or peers?
- [52:05]
Kelly Evans (continuation)
That is a great question. I mean the Starship is going to be a monopoly for the next decade. So in that regard, no. But there are a lot of niches for rocket launches. There's a lot of niches for other companies doing services like surveillance, other forms of communication. So there's a lot of niches out there. But no, this is a monopoly and a unique company.
- [52:26]
Kelly Evans
Do you think all these space related stocks are down today because of how strong the IPO is?
- [52:33]
Kelly Evans (continuation)
They've been down for the last few weeks. I think there has been some money running out of them, you know, into Space X. I mean, you know, obviously this is a huge, huge amount of money to raise and frankly there is some concern that they will be a tougher competitor to the industry. So moving forward.
- [52:49]
Kelly Evans
All right, Tim, thanks so much for joining us today. Tim Horan of Oppenheimer to close out the show. And that's it for us. Thank you for watching. Our SpaceX coverage continues as I join Brian Sullivan for Power Lunch right after this break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
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Podcast Host (Schwab Market Update)
Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics and managing it as one big juicy investment.
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Discover Representative
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Podcast Host (Schwab Market Update)
Learn more@fidelity.com baskets Investing involves risk, including risk of loss. Fidelity Brokerage Services LLC Member nyse, SIPC Member.