00:00When we talk about sort of this whole process, Professor, I do want to start first with that
00:04$135 fixed price approach that SpaceX took to marketing this deal. And I am curious that what
00:12does history tell us that when you have these sort of fixed price sales, does that mean they
00:16left money on the table? Could they have potentially gotten more had they gone with a broad range?
00:22Well, the fixed price setting the offer price even before the roadshow started is very unusual.
00:30The jump today is not at all unusual. Indeed, if the stock price stays at its current level,
00:40the dollar value of the increase with the number of shares being issued is going to leave about
00:48$20 billion on the table. First day profits to those who got shares at the offer price.
00:57And this $20 billion of money left on the table is more than twice that of any other U.S.
01:04IPO.
01:06When Alibaba went public in 2014, they left about $9 billion on the table, the most ever. And
01:16SpaceX has blown that away, just like they blew away the record for the biggest IPO ever.
01:23Yeah. And certainly a company and more importantly, a CEO kind of plays by his own rules. One
01:28interesting sort of a wrinkle in all this as well was the allocation or at least the attempt to
01:33allocate a little bit more directly to retail investors rather than just through the institutions.
01:38And I'm curious as to how that sort of affects what we see not only on the first day of
01:43trading,
01:44but maybe in the next few days as well. I think the main reason for the bigger retail allocation is
01:52because Tesla has an unusually large share of retail investors in its shareholder base. But even though
02:01it had been reported they were going to allocate 30 percent to retail investors, Bloomberg and others
02:07have been reporting in the last few days that that's been cut back to about 20 percent. And
02:13consistent with that, my friends who have a Robinhood account and ask for shares have each received one
02:20share each. So maybe a lot of retail investors did get shares, but they didn't get very many shares.
02:28Yes, certainly below expectations, you have to imagine for a lot of those retail investors. I do want to
02:34talk a little bit about the valuation of the company that we're talking about here. SpaceX at one point
02:39trading with a market value of more than two trillion dollars in terms of market cap. And I mean,
02:46it's just an astronomical figure that we're talking about here. Professor, I do wonder, you know,
02:51how much upside there can be when you go with a valuation out of the gate this high. You think
02:57about
02:57this company. It's not an upstart. This is a mature company that's been around for well over two decades
03:02at this point. Just purely from a valuation perspective, how much is already in the price now?
03:09Well, that's where I and a lot of others have concerns. Currently, the world's most valuable
03:15company is Nvidia. Market cap of approximately twice that of what SpaceX is trading at today. What if
03:25SpaceX is incredibly successful and becomes as valuable as the world's most valuable company,
03:32Nvidia? Well, that's only a 100 percent upside potential. That's not a lot. When Nvidia went public
03:43in January of 1999, the market greeted it with open arms. It jumped 60 percent on the first day of
03:51trading to a market cap of almost 600 million dollars. It had an awful lot of upside potential from there.
04:01With SpaceX, the valuation is so high that the upside potential is very limited.
04:08And would you say the same when you think about, you know, the other two IPOs that are frequently talked
04:14about when we talk about SpaceX. I'm referring, of course, to Anthropic, to OpenAI, because we're
04:20looking at valuations of close to a trillion dollars for those companies as well. I wonder if the same
04:26logic applies to them. And if, in your view, we're entering into an era of just these ultra-high valuations
04:32at IPO? Well, the bullish case, the reason that venture capitalists, private market investors, and now
04:41public market investors are giving such high valuations to these companies is because tech is
04:48different, at least some segments of the tech industry, where companies like Nvidia and Microsoft
04:56and Alphabet and Meta platforms have demonstrated that you can get enormous growth and enormous profits
05:05in certain niches without competition eroding profits. It's not the restaurant industry where
05:13there are lots of competitors. In certain niches, like with rocket launches, SpaceX is really good at
05:23it. It's really complicated. And when they get their Starship rocket working, they're going to have
05:30really low launch costs. Now, that market by itself is not huge, but that allows them to launch Starlink
05:38satellites at low cost and offer Starlink internet access at low cost. And it's not clear that there's
05:47going to be much in the way of competition there. So just like Nvidia gets very big profit margins,
05:53that the reason the market is willing to give these companies very high valuation is because of the
06:00possibility that they can grow their revenue enormously and have really high profit margins.
06:06And that's the main thing I'm gonna give you a bit forward for.
06:07So we'll get started.
06:07I have a lot of the time that this is going on.
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