Betting Against SpaceX & Cooling Data Centers

**SPEAKER_1** (0:00)
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**Ann Berry** (0:27)
Kraft Heinz and Disney, two legacy companies, partner up in hopes of regaining some brand magic. We have the latest from them both. HVAC, the once boring business, has found itself at the center of the AI buildout, but can expect to growth keep up with advancements in chip technology.
And SpaceX, Elon Musk says it could be, quote, worth more than Earth. We dig into new numbers showing that some investors don't share his long-term vision. For Tuesday, July 21st, it's Brew Markets Daily and I'm Ann Berry.
More market details to come. But first, SpaceX. While many investors are betting on Elon Musk's rockets plus communications plus AI giant, evidenced in its $1.7 trillion market cap, there's also a growing group betting against it. And that's short sellers who've amassed about $4 billion in paper profits since SpaceX stock has dropped below its IPO price. Well, that number is pretty striking. And so is the sheer scale of this shorting activity. Roughly 17% of SpaceX's freely tradable shares are currently sold short. That's according to market analytics cited by Barron's. And earlier this month, data from Reuters and Ortex showed that nearly half of the free float, down to about 30%, had been lent out. A sign that short selling activity is exceptionally heavy, especially when you consider this is such a new publicly traded stock. Well, the thumbs down that these short sellers are giving SpaceX clearly needles Musk, who took to X this weekend to post, the survival probability of firms who maintain a significant short position in SpaceX over time is very low. Nevertheless, there are near term pressures on the share price, who is likely to come from about 900 million additional shares that could be eligible for sale as early as August, when lock up restrictions affecting pre IPO investors begin to expire.
One catalyst for this is the release of SpaceX's first public earnings report due out after the market closes on August 4th. That date was confirmed just yesterday.
And it's not just the equity market that's showing signs of investor concern about the fundamental valuation of SpaceX and possible near-term operational execution challenges, because the credit market is showing concerns too. SpaceX raised $25 billion through a bond offering shortly after receiving investment grade ratings. But yields have since climbed a sign of concern of greater risk. So all eyes on that earnings report. Again, that's August 4th after the market closes. And of course, eyes on that Elon Musk X feed. We're going to keep on watching. Coming up in a moment, we answer a listener question and dig into the legacy HVAC companies that have gotten an AI boost. We explore if that momentum is sustainable. But first, a few headlines from the day's trading session, starting with two struggling iconic brands looking to razz up a little bit of magic. Today, Kraft Heinz and Disney announced a multi-year partnership that extends from grocery shelves to theme parks and even dives into original content.

**John Gerteau** (3:37)
That's right, as part of the deal, Disney characters will appear on Kraft Heinz products. For example, we may see Olaf featured on a package of jet-puffed marshmallows. While Kraft Heinz brands, like its signature Kraft Mac and Cheese, will be available across Disney's parks, resorts and cruise ships.

**Ann Berry** (3:51)
Well, both these companies need a lift, so they need this to work. Shares in Kraft Heinz are down 6% year over year. Disney stock down a whopping 20%.
Well, we recently talked about Wells Fargo's suggestion that Disney lean into revenue from monetizing its IP. So here they are trying to do it.

**John Gerteau** (4:10)
And that makes sense. But I'm more struck by a line in the press release that companies may partner on digital content across Disney's platforms. Of course, that could mean marketing. But I wonder if we might see a new show on Disney Plus called The Philadelphia Cream Cheese Caper, like how Hasbro turned its transformers and battleship properties into movies. Either way, investors aren't enthused. Shares in both companies are trading flat today.

**Ann Berry** (4:31)
Speaking of Hasbro, that's ticker HAS. That company stock is up 7% today after reporting earnings that beat expectations. Hasbro returned to profit and raised its full year guidance.
Once again, the success due to its Dungeons and Dragons and Magic the Gathering properties, fueling growth yet again in the digital gaming segment.