The episode centers on the massive retail and institutional interest in the SpaceX IPO, driven by FOMO and the company's powerful narrative as a space and AI leader. However, its valuation is highly speculative, with a wide range of estimates from credible analysts like Morningstar and Aswath Damodaran.
The S&P 500's decision to exclude SpaceX from its index upon listing is a pivotal event discussed in the episode. This forces investors in S&P trackers to implicitly bet against SpaceX, demonstrating that all index investing involves active decisions by the index provider.
The impending IPOs of SpaceX, Anthropic, and OpenAI are set to exacerbate the already high concentration in major market indices. The top 10 companies in the S&P 500 are projected to approach 50% of the index's weight, increasing systemic risk and the potential for volatility.
For years, markets benefited from a shrinking supply of shares (de-equitization) through buybacks. Now, major tech companies like Alphabet and Meta are planning massive new equity issuances to fund AI development, alongside a flood of IPOs.
A study of the 30 largest IPOs of the last 20 years is cited, showing that every single one experienced a significant price drop within its first year of trading. The minimum drawdown was 20%, while the maximum was 90% (Robinhood).
Keep pulling the thread on Merryn Talks Money.