If you’re looking to invest in a piece of Elon Musk’s SpaceX, poised to become one of the most valuable stock offerings in history, you have until Wednesday evening to make your move. Musk has earmarked $2 billion (approximately £1.5 billion) specifically for small investors in the UK.
SpaceX aims to raise a staggering $75 billion through its public offering, which would propel the company’s market valuation to $1.8 trillion, significantly boosting Musk’s personal fortune to an estimated $950 billion.
Although the shares will be listed on the Nasdaq stock exchange in New York, UK investors can access them through brokers or investment platforms such as Hargreaves Lansdown and AJ Bell.
With the buzz surrounding this high-profile flotation, many are wondering whether investing in SpaceX is a savvy move.
While we’re not here to offer direct investment advice, we can help dissect the situation.
To start, consider whether it’s wise to jump in during the initial public offering (IPO) or to wait until the market settles, observe the stock’s performance, and then decide on your course of action.
Get going: Elon Musk has allocated $2billion (£1.5billion) in SpaceX shares for small investors in the UK
If you go in at the IPO you don’t know exactly the price at which you will be buying and you don’t know how the market will move.
As a rule issuers try to price the offering a little below where they think shares will end up, so IPO buyers get a little juice in return for their support. But markets are markets and it often doesn’t work out like that. A tally of big IPOs shows while they generally go to a premium, many don’t.
The biggest up to now was Saudi Aramco, the Saudi Arabian oil giant, which raised $26billion in 2019. It went to a 9 per cent discount on its first day of trading, leaving investors nursing a loss.
By contrast the next biggest share offering – of the Chinese online retailer Alibaba, which was floated in New York in 2014 and which raised $22billion – shot up to a 36 per cent premium.
Further down the scale there have been some real stinkers. Deliveroo, launched here in London in March 2021, opened 15 per cent down on its offer price on the first day of trading and was off 41 per cent within a month.
Then there is the question as to whether you want to back Musk. He is a bit of a Marmite character, though I should set on record that the one time I met him he was thoughtful and courteous.
You are buying into his dream and that’s fine for some. But many seasoned investors would rather pass on this one, for reasons set out cogently by Stephen Yiu at Blue Whale (see below). In any case there are other, arguably safer ways of taking a stake.
SpaceX is already the largest holding in the Edinburgh-based Scottish Mortgage Investment Trust, accounting for 21 per cent of the trust’s asset value. Thanks in part to the interest in SpaceX, its shares are up 25 per cent this year, though on Friday they were slightly below their peak in 2021.
And there will be other ways of getting into the coming US high-tech flotation boom if that is what you want to do. Both artificial intelligence pioneers, OpenAI and Anthropic, are in the pipeline of IPOs expected this year.
This leads to what, for would-be investors, is perhaps the biggest question. Is this the time to be putting money into high-tech America?
An awful lot has to go right to justify the valuations being put on these businesses. If you do want to invest in US equities, maybe it is wiser to buy its large basic industrial and commercial corporations, which are much more sensibly priced.
Maybe even, since this is clearly a very mature bull market, it’s time to think of taking some profit and waiting to see what happens.
What happens to the SpaceX float will be an interesting test of the mood of American investors.
There is still a lot of money sloshing around. If this flotation goes well, as it is generally expected to do, that will indicate that their faith is intact: that the US economy will keep marching forward despite all the headwinds against it.
And if it doesn’t? Well, any negative experience would certainly undermine the plans to float OpenAI and Anthropic, though I can’t see them being pulled.
Maybe it could turn out to be something more: a reminder that bull markets don’t go on for ever.
So there is a lot riding on this one – and not just for Elon Musk.
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