The Biggest IPO In History Isn’t What You Think It Is

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Welcome to Prof G Markets. I'm Ed Elson. It is April 28th. Let's check in on yesterday's market vitals. The major indices were mixed as Trump considered a proposal from Iran to end the blockade and open the Strait of Hormuz. The S&P and the NASDAQ edged up to new records while the Dow fell slightly. Meanwhile, oil prices rose and Microsoft stock fell early on the day. On a renegotiated deal with open AI, the stock later recovered to end in the green. More on that later.
Okay. What else is happening? SpaceX is gearing up for the biggest IPO in history, but investors are starting to wonder what exactly they are being asked to buy. The company is targeting a $2 trillion valuation, which would instantly rank it among the largest companies in the S&P 500 But this is no longer just a space company. It's also a satellite internet company, a launch company and increasingly an AI company with new bets and new acquisitions adding to the story. For all of the hype, there are real questions hanging over what would be the market's biggest event in years, such as can space-based data centers actually work at scale? What happens to Elon Musk's control once the company goes public? Ultimately, can that $2 trillion valuation be sustained in the public markets? Well, here to help us answer many of these questions, we are speaking with Patrick Boyle, professor at King's College London, former hedge fund manager and host of one of the most popular finance YouTube channels. Patrick, so good to see you and so glad to finally have you on the show. I wanted to speak with you because this SpaceX IPO is set to be one of the most important events in a really long time in the financial markets and you recently released a video titled, quote, the SpaceX IPO scandal.
So I will start with the obvious question, which is why did you describe this IPO as a scandal? How is this company being sold to investors? What are you skeptical of with this IPO?

**Patrick Boyle** (4:20)
Well, the thing that's quite questionable about the way this IPO is being done is just the way that it is being forced into the NASDAQ 100 index almost instantly. I think there's going to be a 15-day delay and also the waiting that it will be given is much higher than you would expect for a company with a very low flow. So in a funny way, the company goes public at a very high valuation. People will probably buy in firstly, there's a lot of people are just very excited about Elon Musk and his companies.
They'll put money in, but then the expectation is that the indexes will be buying 15 days later.
At the current valuation they're talking about, it would have a four and a half percent weight in the NASDAQ 100 There's also been talk about possibly S&P pushing for early inclusion as well. And that would essentially mean that there's just a frenzy of it being bought up, stuffed into the portfolios of people who index, who are not really valuation sensitive. And it's the valuation they're talking about, to be clear, they're talking about 125 times sales. So that's not earnings, that's sales. And we don't even really know what the earnings are of SpaceX, there was, you know, Reuters published that they had EBITDA of $8 billion. But EBITDA is not earnings, it's earnings before essentially the cost of building satellites and building rockets, you know, which for SpaceX, you have to imagine is a significant cost.