SpaceX stole the spotlight after entering the stock exchange with a whopping $1.77 trillion market capitalization, raising $75 billion in the largest IPO ever known to the exchanges, surpassing the record held by Saudi Aramco since 2019.
This unprecedented event in the history of global markets immediately put the Elon Musk-owned company in the forefront and brought Musk's fortune past the $1 trillion mark for the first time.
The mega offering relied on the sale of 555.6 million shares at a price of $135 per share, according to Der Spiegel magazine, which sparked a broad investment rush driven by the fear of missing out on the "golden opportunity", but behind this glitter, warnings have been mounted that the valuation is "overvalued to the point of danger", especially since the company's market capitalization is equivalent to 94 times its annual revenues, and this figure is not even close to the tech giants.
Starlink... The spine that holds the group
SpaceX comprises three different segments (spaceflight, satellite internet, and artificial intelligence), but Starlink alone accounts for about 60% of the company's revenue, generating an operating profit estimated at $4.4 billion, while the space sector continues to record losses, while the AI sector incurred a huge operating loss of $6.4 billion, according to recent reports issued by the company.
At the group level, SpaceX posted a net loss of $4.9 billion last year despite generating $18.7 billion in revenue, raising serious questions about the realism of its astronomical assessment.
A new bubble? Experts warn
Economists warn that the company may have peaked its growth, after expanding by more than 2,000% in recent years, with some likening the current enthusiasm to the tech bubble of the late 1990s, when expectations were much higher than reality.
Analysts point out that only less than 5% of the company's shares are free-floating, meaning that any major buying rush could quickly raise the price, before coming under sharp downward pressure if early shareholders decide to sell.
SpaceX faces historic test
The markets are divided between one group that sees SpaceX as leading a space and communications revolution that makes its valuation justified and another that warns that the current numbers are "too great for the company to achieve", and in between, the largest IPO in history remains a watershed moment: Either SpaceX will establish itself as a new economic icon... Or it becomes the first spark of a global financial bubble.
Eyb & Wallwitz's wealth manager George von Wallwitz warned against the huge rush among investors, saying that "this excitement, this euphoria, is very similar, and it pushes experienced investors to be a little more cautious," and Wallwitz likened it to the tech bubble of the late 1990s, where expectations were higher than reality.
Investors should keep in mind that only a tiny percentage of SpaceX's shares will go public, meaning less than 5 percent of the company's total market capitalization will be freely tradable.
If too many investors buy, the share price will rise, but this will later lead to existing shareholders selling their shares, resulting in pressure on the share price and its decline.
Comments (0)