00:00You're an independent financial advisory firm. Would you be advising institutional investors,
00:04retail investors, to own this one? Well, what we do is we try to give people a framing to
00:08understand their decision. And by that count, the simple math obviously doesn't add up. This is a
00:14very expensive stock relative to any rational measure of value. But we're talking about Elon
00:20Musk, who has a tremendous track record of not just success, but convincing people that success
00:25is durable. So it's not a calculus based on valuation. It's a calculus based on faith.
00:31And plenty of people have a ton of faith and have made billions of dollars with Elon Musk in the
00:35past.
00:36And they're willing to give him a pass on this one because they think it can happen again.
00:39I want to talk connectivity a little bit with you and the focus on really telecom Starlink when it
00:44comes to this IPO. In 2025, it was 61% of the revenue. As I was mentioning earlier, I think
00:50for
00:50a lot of people who haven't been to a rocket launch or actually are big users of the AI tech
00:58that SpaceX has, maybe Starlink is the most tangible part of this business that they've
01:03interacted with. In your view, that's a pretty good business, right?
01:07It is a phenomenal business.
01:09It is a truly disruptive...
01:10I mean, there were so many years when we were talking about, and Ed was reporting on it,
01:14the possibility of perhaps that being spun off as its own independent work of the traded company.
01:18And their prediction market contracts on that right now, oddly enough. It is a truly disruptive
01:24business in the classic Clayton Christensen sense of the word. It's a new technology that
01:28offers a product to an underserved community and then builds up from there. So how Amazon
01:33started with books and then blew up to everything. Starlink started with rural customers and has
01:37blown up to everything. It's exactly the playbook investors want to see. And Elon, as usual,
01:42has played it perfectly.
01:44I just, you know, I just recap the numbers. You know, I find that so interesting that you're saying
01:49you can't do the math. You kind of can, you know, and what a lot of the existing cap table
01:54told me
01:55for months and months was, how do I start to model for the orbital data center business? And what they
02:02would say is 2025, not the revenues from, uh, uh, Starlink, but connectivity operating income 4 billion
02:10and the scale of deployment and rate of deployment, literally the operation of putting it into, into
02:16orbit. They just extrapolate out to space-based data center. Can you use faith or hope and do the same
02:22on behalf of clients?
02:23Unfortunately, you have to, there is no other option. There are no orbital data centers in space
02:28right now, right? So you are betting on a brand new technology and what you're betting is the guy
02:32who brought you the past couple of interesting technologies can bring you the next one, but it
02:36is a faith-based process. It is not based in any math you can rationally model. And I was a
02:41sell
02:41side analyst for a decade. I covered the autos. I know how to do a financial model.
02:44Oh goodness.
02:45Um, you know, to a very strong degree. And this is not one of those analyses. So people can do
02:51whatever
02:51math they want to do. The stock's going to trade where it wants to trade. And the two may
02:55coalesce that they may not.
02:56But real quick, without betraying confidence, do you have faith? In other words, did you tell
02:59clients like, look, this is a trade based on faith. We have faith, make the trade.
03:04Yeah.
03:04What I've told clients is if you want to put in for the stock, I gave you a range and
03:09I
03:09just, I'll run through the numbers. The average IPO since 1980 up 19% on day one. So that's
03:14the bogey. 161 for SpaceX is an average IPO one day pop. If you want to look at 2025, it
03:19was
03:19a 29% pop. So 174, which is right around where I think we're trading now.
03:24173 and change. Nice.
03:26So boom, 29% is the average IPO pop from last year. If you want to look at 1999, just
03:32to
03:32go bananas, that was a 71% one day pop.
03:36I remember that.
03:36So that was, we all, yes, yes. I certainly do as well. I was working for a Steve Cohen at
03:41the time and that was an amazing year. That would be a 231 close.
03:44Would Steve Cohen be buying this?
03:46Steve Cohen would have gotten an allocation and probably have sold half of it on the open
03:50and be trading the other half very intelligently because that's what he does.
03:54That's really interesting. Hey, Nick Colas is with us, co-founder of Datatrek Research.
03:58Ed Ludlow is with us. Anthony Hughes, you've been sitting by patiently here at Bloomberg News.
04:04You mentioned though, Nick mentioned SpaceX. The stock right now is up almost 28% here,
04:09172 and change in its first day of trading. Anthony Hughes, you've been thinking about the
04:14valuation, writing about it. Got a question for Nick for us.
04:17Yeah, well, I think one of the interesting questions, Nick, is, you know, we do see it
04:20with a lot of these hot IPOs that they come pretty, you know, they can come, it can rise
04:25pretty sharply out of the gate and then fall off pretty quickly in the weeks and months
04:29afterwards. I just wondered, do you think there's an argument with SpaceX that, you know, perhaps
04:33it could do something a little bit differently just because there's such a need for people
04:36to buy the stock, the index inclusion and stuff like that? Do you think that could
04:40ever be a factor here in helping to sort of put a bit more of a floor under the stock?
04:44I think that it is a factor for the next couple of weeks because we have the Q entry, I
04:48think,
04:49on July 5th, if I recall correctly, 15 days after pricing. So you're going to see some
04:55offset of people who are owning the stock right now selling it to the Qs when it gets included
04:59in the 100. Past that, there seems to be a probably even match and they actually did earlier lockup
05:05expirations for employees and insiders than usual. So you actually compare the additional
05:11add of stock to the Qs to the unleashing of stock from the individual owners that have
05:16it right now. So it should balance out. But I will make one broad macro point. It's very
05:21important. Most IPOs don't work. Most IPOs underperform in year one. And so to beat that,
05:28those odds is relatively hard. Stocks take time to season. Managements take time to season.
05:34This is not a company that has a lot of prior public market experience.
05:37But the executives have a lot of prior public market experience. Elon Musk, for example,
05:41I mean, Gwen Shotwell, for years, the CO has been talked about, not talked about as much anymore,
05:46but being like the adult in the room at SpaceX. So I think people could push back on the experience
05:54part of this a little bit. That is fair. The Elon thing cuts both ways. Look at the five-year
05:58chart
05:58on Tesla and tell me that thing's been a value creator for the last three years. It just hasn't.
06:04Is Tesla the model we should be looking at, Nick, in terms of for SpaceX? Or that's not fair?
06:09I think it's entirely fair because both are basically on a Musk premium and a massive one.
06:14Tesla's going to earn maybe $2 a share this year. Stock trades, what, 200 times that?
06:19So you're talking about big valuations in both names. And I thought it was interesting,
06:23you know, looking at Tesla at $1.5 trillion and this, you know, call it $1.92. You're talking about,
06:30you know, two very large companies based on one person's vision, but not a lot of cash flow.
06:35That's the common factor. And you could be a season management team, but I don't know any
06:38other season management team that can hold those together besides Elon's teams.
06:43Yeah. Ed, I want you, do you have a question for Nick? Because I know Nick's going to leave us
06:47after this segment. So, you know, the lockups are so interesting and like, you know, we remind
06:52ourselves the oversubscription. Actually, like, you know what's crazy? 4X to 5X oversubscription
06:57doesn't even seem that wild to me. Like, look at what's happening in China market for IPOs,
07:01like 20X sometimes. I digress. There's a lot of evidence that SpaceX employees wanted to buy more
07:07shares. And the unusual difference with SpaceX is the secondaries market. They've had regular
07:12liquidity windows. Might that be a difference this time? It certainly could be, but everything's a
07:18function of price, right? If this thing goes to 400, even the most ardent insider might be tempted
07:23to sell. So it's a function of price. All I'm going to say, if the stock tanks a little bit,
07:28it makes it cheaper for SpaceX to buy it and merge the company. Very, very quick. Many times,
07:34SpaceX was the leader of the secondaries. They bought back shares from employees and we never
07:38really reported on it. And that was true at the time. So, yeah. Yeah. I just think there's just
07:43so many moving aspects of this. Nicholas, thanks for jumping in here.
Comments