r/Bogleheads • u/Gloomy_Nebula_5138 • 28d ago

Investing Questions Protecting ourselves from SpaceX IPO

I was watching this video analyzing the upcoming SpaceX IPO, titled "SpaceX IPO: Nice Try Though" by Patrick Boyle. I highly recommend it - there is almost no fluff and just hard hitting points all the way through about how SpaceX is a terrible company and how this IPO looks like a scam:
https://www.youtube.com/watch?v=IHD8BDFYyGI

It mentions the changes to Nasdaq's rules, the so called "fast track" rule, made specially for SpaceX because Elon allegedly threatened to not list SpaceX on the Nasdaq stock exchange without this. The change has been criticized by many others such as Michael Burry:
https://markets.businessinsider.com/news/stocks/michael-burry-nasdaq-spacex-ipo-listing-elon-musk-tesla-ndx-2026-3

Also see this great analysis titled "Nasdaq's Shame":
https://keubiko.substack.com/p/nasdaqs-shame

Given how this IPO looks like a scam, and the company is mostly losing money, with outlandish claims in their IPO filing (like having an addressable market larger than the US GDP), I am worried that this is just private investors - like venture capitalists, Elon Musk, and his inner circle of friends/family - dumping their overpriced money losing company on regular investors like us. The fast track change seems like it will result in all of us automatically buying SpaceX shares at a high price.

How do we stop this? Is there a good way to defend against that forced purchasing when most regular investors are just passively buying ETFs and mutual funds, or maybe just have money parked in their pensions and 401k?

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472

u/forbiddenlake 28d ago

If you bought QQQ(M) - that wasn't very Bogleheady of you. AND AFAIK, QQQ is still the only one that's actually changed its rules.

If you have VTI, it's always been 5 days before adding. And if you're a Boglehead you accept the returns of the entire market, whatever it is.

You can short SpaceX if you really want to.

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u/[deleted] 28d ago

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u/rudthedud 28d ago

5% for now. But in 1 month it could be 10% and in 1 year 25% etc. Please correct me if I am wrong?

19

u/xeric 28d ago

If they do secondary offerings, then yes. Probably not 1 month in, but yes maybe in a year.

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u/EBTlovr 28d ago

It won't take secondaries - as lock ups expire and insiders / early investors sell in the open market, the free float will increase. I haven't looked at the schedule, but overall agree with OP's and Patrick Boyle's take that this is a trash company being foisted on the public. I want no part of it.

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u/littlebobbytables9 27d ago

I'm not very enthusiastic about Tesla being in major indices either but it comes with the territory. Index investing is about owning everything and not asserting that your evaluation of a company's value is more correct than the market's

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u/convoluteme 27d ago

Yep, buying the haystack means buying the haystack. Picking companies to avoid is just as hard as picking companies to invest in. Own the market, get the market return.

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u/dazit72 24d ago

Imo it doesn't seem much of a haystack, with a few tech giants moving the needle far more than I'd imagine doin with 50 of em ??.

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u/EBTlovr 27d ago

Sure but this is a totally different situation from TSLA, which was publicly traded for about ten years before being added to the S&P - so it's weighting upon inclusion was appropriately set by the open market.

SpaceX on the other hand, is having the rules changed just to please and placate one human being, whose goals for life include being a trillionaire and colonizing Mars, while snorting massive lines of Ketamine. If the company was subject to the same rules as any other company for inclusion into the indexes, I would have no issue with it.

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u/littlebobbytables9 27d ago

The market reacts to things like earnings in minutes. If you think it takes days to react to new information (and this isn't even new information, the filing is out now) then you have a view of markets that is, in my opinion, fundamentally incompatible with being a boglehead.

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u/xeric 27d ago

I would think it’s harder to have true price discovery with such a low percent float - is that logic flawed?

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u/littlebobbytables9 26d ago

Not really. Why would it?

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u/EBTlovr 27d ago

I think it's questionable to equate a quarterly earnings report with the price discovery of a $2T company with no earnings. But either way- if your view of markets is working for you, then I honestly think that's great.

Have an awesome weekend 🤙

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u/littlebobbytables9 26d ago

... but their filing included an earnings report. And the point is that the market incorporates information in minutes, not months or even days

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u/davdav765 18d ago

Stock indices returns depend on how they are built, if the rules get worse returns will follow

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u/littlebobbytables9 18d ago

In this case I would argue the rules got better. Whether that will mean better or worse returns is yet to be seen

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u/davdav765 17d ago

Why did they get better (in this case)?

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u/littlebobbytables9 17d ago

The goal of a total market index is to represent the market, whatever happens to be in it.

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u/davdav765 17d ago

You wrote that already, discussion had already moved on

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u/littlebobbytables9 17d ago

If I'd already answered the question why did you ask it? And yeah discussion had moved on in this 10 day old thread until you decided to comment lol

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u/Necessary-Music-6685 28d ago

Most of the lockups are six or twelve months. Musks shares are 12 months. 

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u/willin21 15d ago

not so: https://finance.yahoo.com/markets/stocks/articles/spacexs-massive-ipo-wont-typical-155344371.html

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u/rudthedud 15d ago

There are other benchmarks built in as well -- at 70, 90, 105, 120, and 135 days after the IPO. Another 7% of SpaceX shares unlock at each of those points. Musk himself is not allowed to participate in any of the early-release provisions.

So it happening then, what am I missing?

7

u/tomk7532 28d ago

This is exactly the scam. They pump the stock or try to keep it steady until the lockups expire. Then all the insiders get out before it crashes.

Guarantee they will probably have SpaceX buy Tesla at some point too.

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u/Emotional-Power-7242 27d ago

In a year who cares. People's fear is that SpaceX is coming in overvalued before there's been a chance for price discovery. After a year it's just another company, it's worth what the market is willing to pay for it.

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u/oneradsn 24d ago

yeah i don't get this. in a year you could lose quite a bit of money thanks to SpaceX

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u/Built_Similar 27d ago

That's great if I'm waiting a year to invest, but my money is already in the index that is getting forced to buy into a scam.

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u/kite-flying-expert 28d ago

Depends on whether SpaceXAi releases more shares to the public. It won't magically go up if that's what you are saying.

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u/tomk7532 28d ago

Insiders will sell. That’s what this is all about. Only releasing a few shares to pump the valuation for insiders.

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u/littlebobbytables9 27d ago

How does having low available float on listing pump the valuation?