After an ugly showing yesterday, US equities are finding a bit of relief so far today – at least for now. S&P 500 futures are up 0.8% with Nasdaq futures up by 1.3% on the day. That is at least leading to a calmer mood so far in European morning trade, though I would argue that the underlying mood remains somewhat nervous.
The focus and attention now turns towards the main event in wrapping up the week, that being the SpaceX IPO.
This is going to be the biggest-ever IPO, shattering the previous record by Saudi Aramco. For some context, SpaceX is offering 555.6 million shares fixed at $135 per share. That will raise roughly $75 billion in cash for the firm. Looking back, Saudi Aramco’s IPO in 2019 raised just over $29 billion. So, that puts things into perspective.
Right on launch day tomorrow, SpaceX is poised to debut as roughly the sixth-largest publicly traded company in the US. And according to latest reports, investor demand is somewhere north of $250 billion i.e. nearly four times as being oversubscribed.
That being said, it serves as a good reminder that subscription figures are only an indication of interest, not actual or final allocation. It could end up being more or sometimes less as well.
But for a company of this stature with no real competitor, it is a tempting offer considering investor appetite for big tech.
However, it is best to be reminded that at $135 per share that investors will already be paying a massive premium in putting their money into SpaceX. This is a company whose private valuation is somewhere around $800 billion but looks set to target $1.77 trillion in terms of public valuation.
If this were still last year, there might be less doubts over how the stock might perform on its debut.
But now, we’re starting to move into the show me the money phase on the AI trade. It’s not so much about capital expenditure on AI and spending more to bolster confidence. People are wanting to see the returns and the mood is made even more nervous by the fact that we are seeing Google (and now perhaps Meta) decided to raise equity to finance further AI infrastructure spending.
And all this is not to mention that the market mood is also starting to be hampered by more hawkish Fed expectations as well as the prolonged conflict in the Middle East. So, the timing is definitely a tricky one.
We’ll get a better idea later today from lead underwriting banks (including Goldman Sachs and Morgan Stanley) on the price. But in looking to end the week, it’s all about how shares will hold up in trading on its debut tomorrow.
