Is SpaceX Overvalued? + What to Do When You're Not Getting Promoted

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**Scott Galloway** (1:57)
Welcome to Office Hours with Prof G. This is the part of the show where we answer questions about business, big tech entrepreneurship and whatever else is on your mind. If you'd like to submit a question for next time, you can send a voice recording to officehourswithprofgmedia.com. Again, that's officehourswithprofgmedia.com or post your question on the ScottGalloway subreddit and we just might feature it in our next episode. Our first question comes from reddit user gulliblead37-85.
Is Musk a great financial engineer? I don't see how screwing over institutional and retail investors with mispriced stock valuation helps with the share price when he wants to sell. And for his SpaceX employees, it's far worse to let them think they are going to be rich and then take it away from them. Not great for morale. Okay, so just some data. SpaceX priced at $135 a share at a valuation of about $1.8 trillion, the largest IPO in history, bigger than Saudi Aramco. That put the stock at roughly 94 times revenues on $18.7 billion in sales, which was richer than any company in the S&P 500 The next price is Palantir, which trades at about 67 times. Only about 4% to 5% of the company trades, that's the float. Everything else is currently locked up. The stock zoomed to 225 and then has fallen about 45% from its peak to 123, which is, you know, so it's technically now a broken IPO, but I wouldn't describe it. I mean, you could say it's a collapse from its peak. But by the time this airs, just some fine print, SpaceX will have reported its first earnings and the first big lockup will have come off, so the numbers probably will move again.
Now, the lockup, Musk and a group of big investors are locked up for 366 days until June of next year with no early release. The 366-day term itself is longer than the standard 180 days. So on that narrow point, Musk is the most restricted, not the least. I think to your point, Musk will go down as the greatest engineer of our time, but as a financial engineer. I mean, essentially what you have is he convinced the SEC and Trump and NASDAQ to include them in the 100, which no IPO has ever been included before, meaning trillions of dollars of funds are mandated to put whatever percentage of a weighted index that SpaceX represents that amount of their capital into SpaceX shares. No company right out of the gates has enjoyed that incremental demand. In addition, they were able to go public with just 5% of the flow. Traditionally, in the past, you needed more than 10%. So smaller supply, greater demand, disco, and that is huge demand right out of the gates, which make no fucking sense from an evaluation standpoint. As the lockups come off and people can take advantage of that rich irrational valuation, they sell. That's what they've been doing. Now, sure, the people who bought in are going to be angry.