00:00They call you Mr. IPO. So Mr. IPO tell us as to how we see a vindication in the market
00:06capitalization of SpaceX as it goes public because as Ed was
00:10writing in his newsletter today an awful lot has to go right. I'm in complete agreement an awful lot has
00:17to go right. But this is a great
00:19company. As Lauren was indicating Starship is an incredible engineering feat. It's complicated. But this is actually a competitive
00:33advantage. It's so difficult for a competitor to come up with something similar that's going to be able to lower
00:41launch costs as much as
00:44SpaceX can. That it's going to allow SpaceX to have a big technological lead over any potential competitor. And this
00:54will allow
00:54it to put Starlink satellites into low Earth orbit and offer Starlink Internet access at much lower cost than competitors
01:06can.
01:09Jay, Professor Ritter, you are called Mr. IPO, if you don't mind me saying, because you're probably the most influential,
01:16most cited academic researcher in the field of IPOs of the last 40 years. What is different about this IPO?
01:25And what is the same as those that you have studied deeply in your career?
01:30Well, what's different is this is going to be the largest private sector company ever to go public valuation of
01:41something like one point five trillion dollars dramatically higher than any other of the big companies that have
01:51gone public in the past. They've generally been large state owned enterprises with very large operations.
02:00in profitability. This is a company where the market and venture capitalists have been valuing it based upon enormous potential
02:11future
02:12profitability. But as was mentioned previously, a lot of stuff has to go right to justify this valuation.
02:21When you think about just the multiples that are going to be digested, and I know you've looked a lot
02:25into that. Where does it sit in
02:28past and historical terms compared to those that did list? Because as we've been talking about time and time again
02:34across this entire
02:34network, look, companies are staying much longer private and they're coming in extraordinary valuations. And so you wonder how much
02:42money is left on the table for a retail investor or a different type of investor that hasn't been funding
02:46it from day one.
02:48Right. This is a company where last year it had 18.7 billion dollars in sales, you know, bigger than
02:56just about any
02:58tech startup or, you know, private company that hadn't already been public has in terms of revenue at the time
03:07of going public.
03:08But it's also got the really huge valuation. And to justify a 1.5 trillion valuation, very big future profits
03:28have to be there.
03:29There have only been about 18 companies that have gone public in the U.S. with inflation adjusted revenue of
03:37at least 100 million dollars per year
03:40and a price to sales ratio of more than 40. At a 1.5 trillion valuation, SpaceX is going to
03:49be going public at a price to sales ratio of about 80.
03:52So there haven't been all that many companies that have done this before. But of those that have, on average,
04:01the stock has been a
04:03disappointment to investors. Lots of things have to go right.
04:08Lots of things have to go right. Jay, repeated throughout the S1 is a warning that they will be constrained
04:14by compute now in the future
04:16and Starship has to work very quickly. Is that just boilerplate or they have to say that?
04:23You know, it's technologically true that the profitability of sending people to Mars is very questionable. But the ability to
04:35get things
04:37going in the foreseeable future with Starlink can be an enormous source of profits.
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