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- [00:00]
A
Markets move fast. Get the insights you need in 10 minutes with Barclays Brief, a podcast from Barclays Investment Bank. Each week our experts analyze market themes, helping you anticipate what's next. Listen to Barclays Brief wherever you get your podcasts.
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B
Pushkin. The stock market listing of SpaceX is coming and the hype is is real. Elon Musk reckons this thing, I don't know, cobbling together AI satellites and all sorts of other stuff is worth, get this, $1.75 trillion. The bravado is quite something. Today on the show we pick through some of the details of the SpaceX listing and ask, seriously now, what the hell? This is unhedged. The Markets and Finance podcast from the Financial Times and Pushkin A. Hi, I'm Katie Martin, a markets columnist at the FT in London, which is sweltering, I tell you, under a record breaking heat wave. Stay hydrated, people. Joining me back from his travels in New York, we have the big fellow, Mr. Robert Armstrong. Rob, say hi.
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C
Hi.
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B
Or you could even say ciao given that you've been on your travel.
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C
Ciao, bella.
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B
But we also have back on the show, Mr. John Foley, head of Lex. John, hi.
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D
Hi, Katie.
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B
So, John, you've been digging through hundreds of pages of docs from SpaceX about its proposed listing. What is your favourite bit of these documents, please?
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D
My favourite bit, Katie, is the dinosaurs. It's the bit that says that if we don't buy shares in SpaceX, then humans might go the same way as the dinosaurs.
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C
Is that because Elon Musk is going to shoot a huge asteroid at anyone who fails to purchase?
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D
That's what it says. That's literally what it says?
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B
Yeah.
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C
No, no. What does it literally say?
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D
So the reason that Musk says that SpaceX is doing what it's doing now, it's in the section called why this Matters now, is that they want to make sure that humans don't have the same fate as the dinosaurs. And the way to ensure that is presumably to build colonies on Mars and start mining asteroids and putting data centers in space, which the dinosaurs did not do.
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C
I think that is what killed the dinosaurs in the end is lack of data centers. Anyway. There's so much, there's so much about this, but the offering document how the market is preparing for these massive ipros. I don't even know where to begin. Where shall we begin with this?
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B
Well, let's begin. So with the start, right, so SpaceX says that its mission is to build the systems and technologies necessary to make life multi planetary to understand the true nature of the universe and to extend the light of consciousness to the stars. So ambitious.
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C
How that cashes out. How that cashes out is. Well, they have a space business which we all know about. They do thing, they do send things into space. And last year $4 billion of revenue doing that and a small loss. So the, the costs were 4.7 revenue for loss somewhere around $700 million. So one, one thing you're buying when you buy this at A valuation of 1¾ trillion, American dollars is a loss making space business cool. That is not growing wildly fast. By the way, the revenue in that business in 2025 grew at under 10%. So that's something. Next business. John, what do we have? Connectivity. This is a real business and a very good business.
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D
This is today the good bit, right? This is Starlink, which is the satellite communications business. And it's where most of the revenue and most of the profit, well, the only profit actually comes from at the moment at SpaceX. But it is growing very rapidly. It's got about 10 million subscribers. It could have more than that. And the game there is putting satellites into space and hooking up people who maybe don't have access to broadband at the moment. The problem with this is that the further into emerging markets SpaceX gets with this, the lower the price it can charge. So its revenue per user is falling. And also satellites, and they don't really get into this and it's hard to see this in the documents, but satellites depreciate very quickly. So they last about five years and then you have to replace them. So the depreciation costs for a satellite business are really high. They don't actually break that down very clearly in this document, but it is something that investors will need to.
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C
So it may. It's a capital intensive business. Yeah, very much what you're saying. So, but just for the record, $11.4 billion in revenue 2025, up almost 50% from the year.
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B
What is that? The Starlink bit?
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C
Starlink bit income from operations 4.4 billion. So as of right now, it looks like a darn nice little business. I don't know that I'm going to pay for 1.31 and 3/4 trillion US dollars for it. But moving on, isn't there a third business in here somewhere?
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B
Yes, well, the third bit is the AI bit.
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C
That's Grok.
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B
That's Grok.
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D
It's Grok and Colossus. Colossi, which are the data centers that he's built.
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C
That is A massive, massive money burner. It is a huge pile of burning cash. So that is that $3.2 billion in revenue in 2025, a loss of $6.4 billion. So the first amazing fact that we need to flag here is not the dinosaurs, it's the fact that people are lining up to pay 11 3/4 trillion dollars which would make this, I don't know, one of the ten biggest stocks on Wall Street.
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D
Right? Number seven.
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C
Number seven or something like that for a seriously loss making business.
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D
We worked out that it would be the seventh biggest company in the S&P 500. But if you look at it in terms of revenue, it would be about the 250th. It would be the same size as General Mills, which makes Lucky Charms breakfast cereal.
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B
But you've got to think big, guys. So like in the prospectus, in all the documents, the company says that its total addressable market is $28.5 trillion, which is like a lot to scale.
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C
That world GDP is about 125 trillion. So the addressable market is a fifth of GDP. Right.
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B
And it's basing this number on something, at least in part from something called the digital cooperation organization brackets. Nope, me neither. So there's kind of quite an obscure kind of body that's not backed by the US or most of most European countries that's come up with this number and they're kind of running with it. So first of all, like there's like, there's big ambition here. It's all kind of, yes, let's live on Mars light of consciousness, $28.5 trillion, yada yada. But actually quite a lot of the sort of financial engineering about this is almost more interesting because it's like guys, what are you, what are you doing here? There's a lot of creative stuff going on with how this company works, John.
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C
Katie, let's ask a simple question. Is it mad to pay 11 3/4 trillion dollars for this loss making business? Is it just, is that just insane on its face, John?
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D
So I approached this question sort of backwards by thinking what would make it not mad? Yes, because it is obviously mad. Let's just be clear about the fact that it's mad. But what would make it not mad? 1 so if, if you look at its trading, this will be trading at about 100 times sales, right? A bit less than that. Is anything else trading at 100 times sales? Well, some biotechs are. Cerebras, the chip maker that listed the other day is trading at 110 times some quantum companies, very speculative things. So there are precedents for companies trading.
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C
Those are much smaller.
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D
They're smaller and they're very speculative. Yeah, this is going to be like as you say, 1.75 trillion. The other way of thinking about what would make it not mad they that market that he sees as being worth 28.5 trillion. If SpaceX can get about 3% of that market, then it's not manned by our back of the fag packet maths. As Katie points out, that market may be completely made up because it's from some body that we've never heard of. Also, he gets a bonus if he gets the company to 7.5 trillion. And if you think that he can get it to 7.5 trillion in 10 years, then what he's asking now is not mad.
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B
Musk does have form for making really outlandish predictions about how his companies are going to develop. Right. Wasn't he saying that Tesla at one point was going to be a $7 trillion company? He's very clearly not that.
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D
Yeah, he's talked about Tesla being at least 10 trillion. I think he once said that. He once said that it could potentially be worth 100 trillion. He said with like, with a prevailing wind.
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C
Before I choke on the cynicism of you two Brits, I would like to say that it is important to separate the carnival barker Elon Musk and the business builder Elon Musk. And I agree with you, the carnival barker side of him is very unattractive character, but the business builder is a very impressive character.
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D
That's fair.
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C
He built the first viable independent electric car company. That car company might not be going doing great right now, but it changed the market for electric cars in the world. He built Starlink, which is a major part of the world's communications apparatus. And he's built a real business shooting stuff into space. These are really impressive things. And I think the non crazy bit is of paying up for this IPO is this is the guy who builds stuff successfully. Right. So it's not as if I am trying to sell this to you, then it would really be crazy. This is a guy who's built some stuff. So that would be my positive case.
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B
I mean, to answer your question, Rob, I think yeah, it is like plainly on its face ridiculous for this company, even despite that sort of potential, to have this sort of valuation straight out of the gate. This is assuming that it does get that valuation straight out the gate. But let's move on to the financial engineering that's taking place to make sure it does get to that valuation.
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C
Yes. Let's do. This is, I think this is the most interesting bit of the story.
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B
There is some wild stuff going on.
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C
Yeah. On the side of the kind of Wall street apparatus, the indexes and the exchanges are really bending over backward to make sure that this one works, this, this offering works. So the thing that kind of knocks me out of my chair is they're let, they're letting this company into the indexes sooner. Right. And they are letting it be represented, weighted in the index and in a way that was not allowed before. Right. So they're changing the rules of entry to accommodate this company. And to me, this is like, do you guys want to go to court if this goes wrong? Like, is it like. I've always wanted to be questioned by a senator on national tv, you know, it's like, what are you guys doing? Yeah, it seems very sporty.
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B
There's two types of ways to invest in the stock market, Right. One of them is you do stock picking. You choose individual stocks that you want to buy and some stocks that you don't want to buy, and you just build your own portfolio. But overwhelmingly, the much more prevalent way that people invest in markets is to buy an index product. Something that just tracks an index is this passive investment. It's a divisive issue. Some people hate it, some people love it, yada yada, whatever.
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C
Point is, mostly we love it. Mostly we love it.
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B
Yeah, it's a, it's a really low cost, easy way of just buying an index. And so NASDAQ has already said that on one of its heavily tracked indices that SpaceX will have a fast track. FTSE, Russell and S P are looking at it. They're reviewing it. If I was a betting person, which I'm not, I would say they probably will choose to, to include it. So as you say, it means that the, the speed with which it will enter these, this index, or potentially these indices is going to be much quicker and it's going to be able to do that even though the amount of the company that's actually getting floated on the public market is tiny. So it's a $1.75 trillion company, Musk thinks, but he's listing, what is it, 75 billion of it. Something like much smaller.
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C
There's so much in what you just said. Let's start with the timing issue. The traditional thinking was we don't really know how much a company is worth until it's banged around in the markets for a while. And a lot of investors have had a chance to get a look at it. It kind of finds its natural price range. And for this reason, companies that are newly listed tend to be volatile. And that's sort of the justification for not jamming them into the big indexes right away. Because you have this big floppy, unpredictable thing acting all crazy until it kind of finds its feet in the market. Rushing it into the big indices is like, who cares about all that? We need a lot of passive demand for this product. It needs to be in the big indexes as fast as possible so all the passive buyers in the market will own the thing. Right? Is that basically, is that a fair description? John, have I done any justice?
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D
I think the case for tweaking the rules is that indices reshuffle on a regular basis. And the nasdaq's case, every once a year they decide what's in and what's out. If SpaceX lists in May and NASDAQ doesn't reassess its membership until December, you've got like six months in which the biggest, not the biggest company in the world, but like the seventh biggest company in the American market is not reflected in the index. And so they can, with some plausibility, say, you know, this would be a real anomaly and it would be a distortion and so on.
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C
Okay, let me just do the basic challenge to that view, right?
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D
Which is easy.
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C
But when you have a nominally 11 3/4 trillion company, but there is only 5% of it or whatever being listed, you know, or 10% of it or whatever it is, you have a scarce number of shares, relatively speaking, right? That means their price is going to be high. And so to determine the value of the company, you multiply the price on these quite scarce shares by an enormous share count that represents the whole company. And so who's to say it's the seventh largest if you're only floating a small percentage of the shares, you can't just do that multiplication and declare this is the seventh largest company.
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D
That is totally correct. Like market caps are not real. Nothing is real. Birds aren't real. Like and, and I would distinguish between flexing the, what they call the seasoning requirements that you talked about and the date of inclusion versus this really odd thing about giving an extra weighting to under, you know, to thin float companies, which does seem to me to be not great, and also incentivizes companies to have low floats.
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C
But all of these things work together. Speed of entry into the index, how it is weighted in the index relative to actual float of its shares, other factors we can also talk about. All of this basically allows for the speedy transfer of risk in this company from company insiders to Joe and Jane public.
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B
Well, let's talk a little bit about that as well because normally when a new company comes to market, those insiders who have some equity in the company to start with, they have these lockup periods which are generally quite long, which means that they're told you can't sell your shares for a certain period of time. Again, you have to let this thing like settle down on the market before you sell up. In this case, some of those insiders have an accelerated path towards getting rid of some of these shares. So it does sort of somewhat smell like insiders just want to like get rid of this stuff and, and shove it onto retail investors. That would be the cynical view here.
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D
It's also though the lockups are kind of slightly overstated in the sense that you can always sell early if the underwriters let you. So it's not a rule that you can't break the lockup. It's just like Goldman Sachs and Morgan Stanley, whoever, if they give you permission, you can. So maybe this just reflects reality. They would have let them out anyway.
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C
I think the larger context here is that changes in rules and long standing practices are happening at a moment when the valuation of the whole market is extremely high. And that valuation is supported by a small number of companies that have extremely, extremely high valuations clustered around AI, which this is one I could give you my long tiresome lecture on. You never know when you're going to have a correction in an overvalued market, et cetera, et cetera. It doesn't matter. But this is going to look awful if the correction comes this year, right? Wall street has floated this historically large deal. Rules have been changed on the left and on the right to make it all happen. There's going to be widespread ownership of this thing and if it turns into a turkey, we're all going to court and it's going to. That's what the story is going to be. I'm just saying that, right? And you know, things happen and buyer beware and nobody's forced to own anything they don't want to own. And we're all grownups here. But if you are any of the underwriters of this thing, you better have all 10 fingers and toes crossed that the AI bubble doesn't pop in the next 12 months. Because if it does, they're going to be doing discovery on your emails the
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B
other Kind of element of, of the documents that sticks out here is like governance. Right. So basically this is the Elon Musk show. He basically can't be removed from his position. He gets to overrule his board on whatever he likes.
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C
It's hard to sue him, very hard
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B
for shareholders to sue him. So a bunch of US pensions have got together and called it the most management favorable governance structure ever brought into the US public markets at this scale.
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C
Facebook now, Metta, Google now, Alphabet also have these structures, but I sure wish they didn't. I think they're unfair and anti capitalist and they are against motherhood and apple pie.
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D
I, yeah, I'm a, I'm a pro disclosure libertarian on this topic, like, but I agree with you in the sense that I wouldn't want. I think it's foolish to buy shares in a company where someone has, and there are worse structures than what Musk has, by the way. There are companies where the votes the founder has go up as they sell their shares to make sure their control stays the same. If you buy shares in that company, you have only yourself to blame if the founder does something stupid.
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B
Yep. But if it gets plonked into the index product you own, then you know, you're screwed, aren't you?
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C
That is the issue. We've been telling retail investors, quite rightly for 30 years now, since John Bogle and Vanguard and all the rest, the right way to invest is with passive products. And that is true. It is the right way to invest. You know, capture the open return of the market without taking individual company risk, diversify, et cetera, et cetera. And that's been the best financial innovation that we've had in hundreds of years. Hundred years. The downside of that is you're going to have, you can't discriminate. I can't say when I buy my S&P 500 index product, I'd like the S&P 500 without that stupid Meta and its dual class shareholders.
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D
Why can't you do that? Why can't there be a tracker that says we only invest in companies without dual class shares or we only invest in companies that Elon Musk doesn't run. You could launch that tracker and no one would buy it but you. But there's no reason you can't have an S and P X SpaceX. And if people want that, then it should exist and will exist.
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C
It's just complexity. The beauty of the whole thing, the beauty of the vision of passive investing is that it was just dead simple and you didn't have to think about it and whatever, it's a dumb product for dumb people.
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D
It's free money.
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C
And if you make the world complicated in certain ways, the beautiful simplicity is drained away.
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B
This sounds like a case of enshitification, of passive investment. So this thing is going to happen whether you like it or not. You may as well get ready for it. Another thing that is going to happen whether you like it or not is Long Short. So we'll be back in a sec.
- [22:02]
A
Today's markets move fast. Get the insights you need in 10 minutes with the Barclays Brief, a new podcast from Barclays Investment Bank. Through sharp dialogue and scenario based analysis, our leading experts analyze key market themes each week. So whether you're managing a portfolio or leading a business, the Barclays Brief podcast can help you make smarter decisions today. Stay sharp, stay briefed. Find Barclays Brief wherever you get your podcasts.
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B
Okey doke. Now it is time for Long Short. That part of the show where we go long a thing we love or short a thing we hate. John, what do you got?
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D
My I'm gonna go long horror films or movies as we call them here, because I'm a huge horror film.
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C
Me too. I didn't know that. I'm glad we have that in card.
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D
I think we might be entering a golden age of Horro movies. I went to see Obsession yesterday, which is brilliant and like very low budget and we've had it. We've had this year already a few really good movies. And I think because, because the, the zeitgeist, the theme of 2026 generally is horror. Like just life is horror.
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C
Yeah.
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D
I think we're gonna have you watched,
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C
have you watched Widow's Bay on Apple?
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D
No, not yet.
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C
It's very good. It's really good.
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D
That would be tonight.
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C
Katie, what do you have for us?
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B
I find horror movies too scary. I am long the Enhanced Games. You know the thing, it's like, it's like the Olympics but on steroids. And everyone's allowed to have steroids. And it was touted as it's going to like smash all these world records and let's see what the human body can do if we pump it full of juice. Anyway, only one world record has been beaten, not that it will be recognized by the world record people. It was 50 meters freestyle men's competition. The contestant managed to squeak ahead of the official world record with loads of dope and with some sort of special swimming costume that you're not allowed to wear in the proper, proper sports. Also there are multiple people who have won events there who were not doping.
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C
That's very disappointing.
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B
Very disappointing for the organizers. Very amusing to me.
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C
Yeah, of course. I wonder why. So they're just there to make a point.
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B
Yeah. Well, also the prize money's massive, so some of them are like, sod it, I'll do it. So one of them who won an event said, man, they gotta do better than that. They need to train a little harder. Get on that shit a little bit more. Good trolling.
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C
I find myself surprised to belong the Iranian news media because I find myself reading these articles in the FT and in other newspapers about what the developments are in. In this war. And of course, you can't believe anything the Trump administration says because they just make it up. Oh, it's, we almost have a deal. We don't have a deal. We're going to drop bombs and you have to go down four paragraphs to find out what the Iranian news media is saying to get some sense of what actually might happen. So, you know, a lot of bad things have happened in this war, but it may have brought the Iranian news media into a kind of golden age.
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B
Yeah. So the golden age of Iranian news media, the steroid Olympics and horror movies. I think it's a good combo. Chaps on that. We're going to come back on Thursday, Brits. In the meantime, remember factor 50 and stay hydrated. Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forehead. Special thanks to Laura Clark, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30 day free trial is available to everyone else. Just go to ft.com unhedgedoffer I'm Katie Martin. Thanks for listening,
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D
Sam.