SpaceX pops 11% at open after biggest U.S. IPO in history
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SpaceX shares rose 11% in initial trades Friday, placing the company in the top 10 largest companies in the U.S.
Why it matters: The $150 price indicates a $1.97 trillion market cap, putting it immediately among the top 10 largest U.S. companies.
Driving the news: SpaceX shares priced late Thursday afternoon at $135.
- If SpaceX were included in the S&P 500 today, it would be over 5% of the overall index based on its current valuation.
What they're saying: "I gave SpaceX less than a 10% chance of succeeding at all to be clear," Elon Musk said in remarks ahead of the company's debut, adding that it was worth the try to create a "space-faring civilization."
Friction point: SpaceX went into its IPO trading at 90 times its sales (not profits. Sales.)
- That indicates a valuation that is divorced from underlying business fundamentals, Adam Johnson, portfolio manager at the Bullseye American Ingenuity Fund told Axios.
- Historically, the majority of companies that go public underperform the market in the first three years, according to analysis from University of Florida finance professor Jay Ritter.
Yes, but: The top performing companies in the S&P 500 are all trading at a premium to their underlying earnings, a dynamic that has been exacerbated by the euphoria around the AI boom.
- "Hype is a borrowing, if you will, in the short term against future performance, so some companies will repay it," Isabelle Freidheim, founder at Athena Capital told Axios.
What we're watching: What happens when the lock up period ends.
- Early investors may sell as much as 20% of their holdings as of the second full day of trading after the next earnings report. Those who got in early may want to realize some gains.
- Anyone can sell 180 days post-IPO, except Elon Musk, who has to hold for 366 days.
- "The lock up ends fast, so once insiders can sell, we'll see who's left holding the bag," Sarah Kunst of Cleo Capital tells Axios.
The bottom line: The demand is strong for this stock regardless of valuation.
