SpaceX’s IPO Will Bankrupt YOU

Yes, YOU.

Elon Musk just became the world’s first trillionaire.

And the SpaceX IPO went live today.

Here’s how we got here — and why the structure of this deal is worth understanding.

The chain of mergers that created this

2022 — Musk buys Twitter for $44 billion. Backers include Andreessen Horowitz, a Saudi prince, the Palantir co-founder, and Jack Dorsey himself.

Within a year Twitter is worth less than half what he paid.

Problem. Solution — AI is hot. Musk owns an AI company called XAI. He merges X into XAI. No cash changes hands. X investors receive XAI stock.

New problem — XAI burns money constantly.

Solution — Musk owns SpaceX. He uses SpaceX to acquire XAI. Again no cash changes hands.

Three companies. Two mergers. Zero dollars actually paid.

Everyone who helped take Twitter private now holds SpaceX shares. Those shares are only worth something on paper until SpaceX goes public.

The IPO structure that’s unusual

Normal IPO — 90% of shares go to institutional investors. Pension funds. Banks. Insurance companies. Regular people get 10%.

SpaceX is offering 30% to ordinary retail investors.

When an IPO gives a far larger allocation than normal to retail investors it usually means professional investors won’t buy at the offered price.

The price is too high for sophisticated money. So you sell it to unsophisticated money instead.

IPO price — $135 a share. Valuation — $1.78 trillion. Total raised — $75 billion. Nearly three times the previous IPO record.

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The index fund problem

Musk found a way to make people invest in SpaceX whether they want to or not.

Index funds.

An index is a list of companies. A fund mirrors that list. When a company gets added to the index every fund tracking it is required to buy shares — not because they think it’s a good investment but because the rules require it.

Nearly a third of all American stock is tied to index funds.

The NASDAQ 100 tracks the 100 biggest non-financial stocks on the NASDAQ exchange. Under normal rules new companies have to wait up to a year before being included. Seasoning — letting a stock trade publicly long enough to determine if the valuation makes sense.

This spring NASDAQ changed their rules.

If a huge company goes public it gets into the index in 15 trading days. No seasoning required.

The S&P 500 held firm — still requires a full year of seasoning and demonstrated profitability. SpaceX can’t get in there.

But the NASDAQ rule change means SpaceX could trigger mandatory buying from every fund tracking the NASDAQ 100 within two weeks of going public.

Pension funds. Retirement accounts. 401ks. Forced buyers who had no say in the decision.

The actual concern

The early Twitter investors and SpaceX backers need retail buyers to pump the price so they can cash out.

That’s what an IPO is — early investors who took risks get to exit. Normal. Legitimate.

The concern here is the scale. The valuation is nearly three times the previous record. The company loses money outside of Starlink. The AI business is renting its data center to a competitor. The rocket hasn’t successfully delivered cargo to orbit besides a banana.

And the rule changes that would force retirement funds to buy were specifically created to accommodate this IPO at this scale.

When the people running the deal aggressively market to retail investors who don’t know any better — while sophisticated institutional money stays on the sidelines — that’s worth paying attention to.

The comparison to pre-1929 market dynamics isn’t casual.

Overvalued paper assets. Concentrated early holders looking to exit. Rule changes engineered to create forced buyers. Retail investors holding the bag if it collapses.

We’ll see what happens.

But the structure of this deal is not normal. And the people getting the best access to it are not the people who will be hurt the most if it goes wrong.

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So I had to leave out the deeper parts, this was just the surface, the plot thickens ➻ HERE

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