SpaceX. A price that thin is a guess.
SpaceX floated at $1.7 trillion, the biggest in history, for a company that loses $5 billion a year. Only 4% of it was for sale, and the biggest buyers could not say no.
THE GIST ON SPACEX: "The Price Machine"
How did SpaceX get a $1.7 trillion price?
SpaceX floated at $1.7 trillion, the biggest in history, for a company that loses $5 billion a year. That number was engineered. Only 4% of the company was for sale, the owners can't sell, and the biggest buyers can't say no. The number does things the rockets can't.
What makes a price true?
A true price appears where buyers and sellers agree, and it works because everyone is there by choice. Think of a street, where every house is valued off the last one sold. Now imagine just one house sells, the buyers signed something forcing them to buy it, and every other house is banned from selling for a year. The whole street gets revalued off that one sale.
That's what happened here. 4% of SpaceX was traded and the rest was locked away. The buyers were index funds whose rules made them buy. That's most likely your pension.
What rule was dropped?
When you float a company on the stock market, a tenth of it has to be for sale, because 10% means enough people are haggling to come up with the true price. But Nasdaq cancelled that rule six weeks before SpaceX went public, so they only had to sell 4%.
That means barely any of it is being negotiated by barely anybody. A price that thin is a guess, and everyone's treating it as a fact.
Who ends up holding the bag?
A tracker fund holds whatever it's told to hold, including your pension's. In a year, when the lock comes off, everyone who owns the other 96% picks their moment to sell. Guess who's going to be holding the bag? Do you think it's going to the moon?
Is SpaceX really worth $1.7 trillion?
Your take. One tap, then see how everyone else voted.
Quick answers
How much of SpaceX was for sale at the float?
Only 4%. The rule that a tenth of a company must be for sale was cancelled by Nasdaq six weeks before it went public.
Why did index funds buy?
Their rules made them buy. Huw says that is most likely your pension, because a tracker fund holds whatever it is told to hold.
What happens when the lock comes off?
In a year, everyone who owns the other 96% picks their moment to sell.
See you on the next one.
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