Illustration: Sarah Grillo/Axios
The markets are starting the week in their trillion-dollar IPO era, now that SpaceX shares are trading.
Why it matters: Think of Elon Musk's company like a pebble, a big one, thrown into a giant lake of equity — there will be ripples through the public and private markets, and they'll be rippling for a while.
- "Any large IPO has a gravitational pull to them, so they can have sizable effects on the public markets, on private markets and sectors," Aaron Mulvihill, a strategist at JPMorgan Asset Management, tells Axios.
State of play: Those impacts take time. SpaceX made only a small slice of its shares available to the market — around 5%.
- In a typical IPO, a company will offer up about 10%-20% of its shares as its float, Mulvihill says.
- This was done in part because of the company's high valuation — an IPO of 20% of a $2 trillion company might have been market-disrupting.
Between the lines: A float this small means that you should take all those big numbers about the company's valuation — and Musk's wealth — with a dash of side-eye. It's all on paper for now.
- Kind of like if, say, the Girl Scouts made 1,000 boxes of Samoas cookies, but put only 50 boxes up for sale.
- People would bid up the price of those delicious caramel, chocolate and toasted coconut confections. But once more cookies hit the market, the price would likely fall. Or perhaps our willingness to spend big for these cookies forever keeps its price higher.
- "Hype often peaks on day one," Bill Smith, CEO of Renaissance Capital, wrote in a note yesterday.
By the numbers: The average IPO in this decade was down 26% from its offering price after one year, according to data from JPMorgan.
Zoom in: There's no question that investors are thirsty for SpaceX, particularly retail investors.
- SpaceX had the largest day of retail net buying for an IPO in recent history, per Vanda — $117.6 million in net buys, surpassing a record set by Coinbase in 2021.
- SpaceX accounted for roughly 56% of all retail net buying on Friday, per Vanda.
- Apex Fintech Solutions, a clearing and custody platform that serves retail brokerages, has similar numbers. The firm says that traders bought $2.4 billion of SpaceX stock and sold $1.8 billion — one of the largest net buys the firm has ever processed.
Zoom out: Retail wasn't alone on the buying spree. There are now 40 actively managed ETFs holding SpaceX in their portfolios, ETF analyst Eric Balchunas posted Saturday.
- This is a new thing. A lot of attention's been placed on whether the major indexes fast-tracked SpaceX because that would mean the biggest ETFs — the passive ones that track the Nasdaq, S&P 500, etc. — would be exposed to this new company pretty early.
- But these actively managed ETFs don't have rules to change. "They can buy, sell whenever, whatever pretty much," he says.
Friction point: You might hear that folks are upset about having SpaceX added to their investments, but clearly there are a lot of investors who are clamoring for it.
The big picture: SpaceX is expected to gradually increase its float, as its lockup period expires and it gets listed on some major indexes.
- SpaceX is expected to list in the Nasdaq 100 index around July 6. That means all the ETFs and index funds that track the Nasdaq 100 — including the popular QQQ — will have to buy.
- It hits the Russell 1000 around September or December.
What to watch: Because the SpaceX IPO appears to have gone relatively smoothly, that clears the path for more mega IPOs — Anthropic and OpenAI likely among them this year.
- And if those AI behemoths have successful debuts, we could be looking at a very different stock market.
