SpaceX IPO tests depth of retail investors' pockets
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Illustration: Lindsey Bailey/Axios
Retail investors are salivating for SpaceX shares, and market watchers are wondering whether recent trading volatility may have had something to do with the Elon Musk-led company's big public debut tomorrow.
Why it matters: With SpaceX, Anthropic and OpenAI all expected to hit the market in the next few months, investors are watching for signs that retail money is becoming a finite resource.
State of play: Everyday investors submitted more than $100 billion in purchase orders for SpaceX shares in the company's record-breaking IPO, Bloomberg reported — far more demand than will be met.
- Meanwhile, several assets with a well-known retail base — bitcoin, bitcoin treasury company Strategy, and perhaps most obviously, Tesla — have had a fairly rough June so far.
- Analysts at Vanda Research — which specializes in tracking retail trading activity — noted Wednesday that retail was on track for its third straight day of net selling of single stocks, something that hadn't happened since March 2020.
Zoom in: "Our top 2 theories for this are," the Vanda analysts wrote: "(1) AI expenditure growth is peaking (with the shift to cheaper models)."
- "(2) retail investors may be looking to build dry powder ahead of the SpaceX, Anthropic & OpenAI listings."
Yes but: The latter seems like a sensible theory, but it's hard to see clearly in the data.
- Simple regression analysis of S&P 500 stocks with low institutional ownership — a decent proxy for high retail ownership — turns up no evidence that retail-centric stocks fell more sharply over the past week, month to date, or since the June 2 market peak.
Between the lines: It seems like the simplest explanation for recent swings in the market is the breakdown in momentum stocks. (That is, shares that have been going up for a while.)
- That category trounced the broader markets in April and May.
- After a stronger-than-expected jobs report pushed interest rates higher on Friday, many of the tech stocks that have driven momentum trading came under pressure.
What they're saying: "Retail investors seemingly cut their losses amid tech weakness, rather than selling to raise liquidity in anticipation of prospective opportunities," writes JPMorgan analyst Arun Jain, who specializes in analyzing retail activity.
