00:00With us now, we've got host of Bloomberg Tech, the one and only Ed Ludlow.
00:04Ed, thanks for coming up early.
00:06He did watch the game, I just want to note.
00:07I did watch the game.
00:07He did watch the entirety of the game.
00:09Do you ever sleep?
00:10No.
00:10Rarely.
00:11I mean, you have been on this all week.
00:14You have been on TV, on this, on radio, on all the platforms.
00:17When we played our headlines earlier, you heard Elon Musk say he gave this a 10% shot
00:22of actually succeeding with all these goals.
00:24Yeah.
00:24So explain to me what just happened.
00:27Then why are all these people buying into this huge valuation?
00:30This stock is massively oversubscribed.
00:32Why does the market have such confidence in this company and this man?
00:35It's a referendum on Elon Musk, essentially.
00:38You know, everything that SpaceX presented to the market, it's pitch for the future, right?
00:44Yeah.
00:45I've said this to David so many times, but it's just the easiest way for everyone that's watching
00:49and listening to understand.
00:50When you file to go public, you file an S1.
00:53It's a document.
00:54It's called a prospectus.
00:55And you basically say to investors, here are all of our ideas and plans, and here are
01:00all the risks involved.
01:02And it just reads like a Christopher Nolan sci-fi script.
01:05And, like, aren't the first couple of pages a bunch of, like, pictures of, like, rocket
01:08ships and things?
01:09And, you know, there's an element that SpaceX, we can get into some of the ways, but they
01:12just don't do things the normal way.
01:14Elon Musk doesn't conform to Wall Street norms.
01:16But, you know, the point is that SpaceX, in going public, needed to raise money.
01:22They need money to fund a bit of a pivot in the business, which is they're going from
01:28launching satellites for customers in the private sector and the government, and a Starlink
01:34satellite constellation themselves.
01:36You basically can get very good Wi-Fi that, instead of coming from terrestrial cables
01:42and beamed to via a box, comes from a satellite, great business working really well.
01:46Their future looks so different.
01:48You know, it is basically part one, put data centers in space, data centers in the form
01:54of satellite, become an AI company, sell AI software like OpenAI and Anthropoc do, and
02:00still the original goal of getting humans to Mars.
02:04It's all in there.
02:06And it's all sort of economically explained, if you know what I mean?
02:13Yes.
02:14David, you and I have tried to get into that.
02:15They do emphasize in the perspective that this is a new economy.
02:18This is a radical departure for the existing economy that we have.
02:22Let me flag the great big take story that you and many of your colleagues have written
02:26about, the road to this idea.
02:28I think it's so fascinating.
02:29And you talk about the urgency that Elon Musk felt and conveyed to his team.
02:33And that had to do with, you know, getting out there before the midterm elections, which
02:37I find fascinating, getting out there before Anthropoc and OpenAI, and then also doing this
02:40before his 55th birthday, Elon Musk's 55th birthday.
02:44A small roll of the eyes there for our radio audience.
02:47But explain how he was able to do this so quickly.
02:50It wasn't long ago that he said, we don't need public markets.
02:52We can continue to rely on the private markets.
02:53Like, originally, the story around SpaceX was that they would spin off Starlink, that
02:59business, like the internet business that I told you about.
03:02And Musk had said for a really long time that he would only do that when their numbers were
03:07good, when they had strong revenues and good cash flow.
03:09And so when we got to the end of last year and the story started coming out that they would
03:13go public, it was a bit of a surprise that it would be the whole company.
03:17But we quickly reported, and, you know, Bloomberg broke the story on this, the whole point was
03:22to raise money, buy GPUs, chips for running AI models, and put them in space, right?
03:30And that is, you know, that's a big part of the story.
03:32And all of those factors that you explained, based on very detailed reporting, are true.
03:38You know, Musk and the CFO of this company, Brett Johnson, had so much control over the process
03:43that's normally run by the bankers.
03:45You know, they did something unusual, which is just a technical thing.
03:48But they, before they even started marketing the IPO and went on the road and tried to
03:53convince investors of the brilliant story and the prospectus, Elon Musk and Brett Johnson
03:58basically were like, let's set a price, $135 a share.
04:02Typically, you don't do that.
04:04You say, okay, here's a price range.
04:06And you kind of say, what do you guys think?
04:08Should we go up a little bit, down a little bit?
04:11And, you know, our understanding and our reporting is that it was Musk that really made that decision
04:15in part to take everyone's leverage away to control the IPO and do it on his terms, which
04:21is very Musk-y.
04:22Very Elon Musk, yes.
04:23Even if the mechanism of the IPO was unusual.
04:26All right.
04:26So it closed up 19% higher on the first day of trading.
04:29It's now at $161 per share.
04:31But as we talked about, this stock was four times oversubscribed.
04:35Yeah.
04:35So, like, how does that work?
04:37Is this if you're in line to invest in, you know, space stations on Mars, stay in line?
04:42Like, how are you getting this?
04:43And how do they prioritize?
04:45So everything is relative.
04:46It was four times, maybe almost five times oversubscribed.
04:50You know, in IPOs around the world, not just in the United States, there have been IPOs that
04:56are way more oversubscribed than that.
04:57But I would measure the demand on a dollar basis.
05:00So they sold $75 billion worth of stock.
05:04There was $350 billion of demand across retail investors and big institutional investors.
05:10It means everyone is disappointed, right?
05:13You know, everyone that tried to get...
05:15So, like, you know, some of your audience will probably be saying, yeah, that was me.
05:20You know, they'll be listening and going, God, you know, I really regret that I couldn't
05:23get the shares at 135.
05:24Maybe they used a platform like Robinhood or their online brokerage and they applied for
05:29a thousand and they got a hundred.
05:31Or in most cases, they applied for a few dozen and got one or seven or whatever it is.
05:37So then when trading started yesterday, they have a choice.
05:40Do you try and buy shares on the open market?
05:44You know, it's better to have the shares at 135 and then if they go up, that's great.
05:49Then buy them at a higher price and then they fall.
05:52You know, that's not good.
05:53Before we let you go, last night, celebration at the JP Morgan building, just a stone's throw
05:57from where we are sitting today.
05:59Jamie Dimon bringing out the tomahawk steaks for everyone to enjoy as a result of all of this.
06:03Wall Street's happy, but I look at this nugget in, I think, Bailey Lipschultz's recent piece.
06:08Yeah.
06:09SpaceX is not going to pay any fee if underwriters of the offering agree to exercise their ability
06:13to sell another 15% of shares.
06:15Use this green shoe.
06:16Green shoe, yeah.
06:16Why would they agree to such a thing?
06:18Why, given the magnitude of this, have banks kind of not rolled over but done so much to
06:23lessen the amount of pay that they'd be getting as a result of this deal?
06:26The banks are going to phone me now and the bankers because of my answer.
06:29But, you know, go back to what we were saying about Elon Musk and the CFO setting the price
06:33and dictating the terms.
06:35The bankers got paid.
06:37It's not entirely clear to me what it was they were doing.
06:39Actually, you know, there's a lot of evidence that Goldman Sachs in particular did a very
06:44good job of placing the stock with, you know, the whole point is when you decide who to
06:50allocate the shares to, you want to go to an institutional investor that will hold on to them for a
06:55long
06:55period of time.
06:56It's actually why there were so many retail shares allocated because, you know, the company.
07:00And there are penalties for, you can get them in the penalty box if you flip them too quickly.
07:04Depending on.
07:05Depending on.
07:06Yeah.
07:07Actually, I'm just going to say I don't know the answer to that.
07:09But basically there's a distinction of buying stock in the open market, being allocated in the
07:14IPO and whether you're an employee.
07:16The main point is that the banks made a lot of money from this.
07:20Musk did also negotiate very low fees in general.
07:24Because the scale of it, you know, is just so unprecedented.
07:28On the green shoe thing, you know, everyone on the trading floor of the NASDAQ was wearing
07:32green shoes.
07:32I saw that.
07:34Which Musk signed off on.
07:35So there we go.
07:37There we go.
07:37Ed Ludlow.
07:38I can't.
07:38The anchor of Bloomberg Tech joining us here in New York as he makes his way back to San
07:41Francisco to start the show there on Monday of next week.
07:44We'll surely track this as it goes along.
07:45Ed, thank you very much.
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