00:00 Speaker A
Like I mentioned at the top of the show, big week for uh SpaceX, potential uh IPO there. Open AI, potentially filing its prospectus, some, it could even come at some point today. Whatever it is, these two companies are very likely to be public companies at some point this year. And I I think back to all these stupid stories I still continue to see pop up. If you invested a dollar in Amazon when uh it IPOed, you’d be a millionaire. Like, on day one, what do you do with these companies?
00:33 Speaker B
You know, I don’t think you do anything. I would love to have these companies come out, see a big pop, and then actually buy it at a much lower valuation. Doesn’t everybody remember when Facebook came out at 40 bucks, you know, years ago, was the most expensive IPO at the time, and then it settled around 16 before it started moving up. I mean that was over a 50% decline. You know, my view is, first of all, let’s look at the red to yellow flags.
01:10 Speaker B
They’re going to do 30% allocation to retail on SpaceX. Usually allocations to IPOs like this are 5, 10%. So when you have five times the amount of IPO shares going to retail crowd, that just tells you where the market is. And I don’t think it’s, you know, I think it’s sort of a sign of the times, but I also think that that IPO is really based on euphoria versus strong institutional ownership. Also, if you’ve got a buck in SpaceX, it’s already coming out at 2 trillion. You lost when it was at one and a half, 1 trillion. When was it at 100 billion? So, we’ve missed all this upside. Every investor is just taking out private equity, you’re just taking out all these massively wealthy institutions that are 10X, and you’re taking out the 10x, 15x player. I don’t want to do that. I’d rather see SpaceX come out at 2 billion, let the punters punt, and then buy this thing when it’s a trillion dollars. Also,
01:52 Speaker B
do they make any money? Can they make a profit? Where are the earnings? There’s no earnings on SpaceX. And I think that that’s what the problem is. That’s why this is that bubbleish feeling. It’s got that dot-com pro energy because we’re putting out companies that are two trillion dollars that don’t make a buck.
02:08 Speaker A
Jared, this is exactly what you wrote about.
02:10 Jared
Yeah, well, I I think there’s something to be learned here from IPOs in general. I’m going to throw out a stat that I got from Kathy Donnelly, wrote the book on how to trade IPOs. According to her research researching hundreds of these, 90% of IPOs undercut their first day lows usually within the first year. So it it costs you nothing to sit most of these out. There are very few IPOs that are huge that just rally out of the gate. Alphabet, Google was one of those.
02:40 Jared
But most of the time, you’re going to have better opportunities down the road. The reason these are different is because SpaceX is causing the Nasdaq and these other uh exchanges to rewrite the rules so that you’re going to be forced to own these. If you own the Nasdaq 100 in a very short period of time. So,
02:51 Jared
my my if you own the Qs, if you own some broad market exposure here, you’re probably going to own it already. I don’t think you need to jump in.
03:00 Speaker A
Uh Nez, when I think 30% allocation to retail, I’m thinking
03:04 Nez
extreme volatility.
03:05 Nez
100%. And look, we have seen this before where there’s been so much euphoria around these IPOs that you will have uh investors piling in on the first day and then you see the real action later. Uh we’ve seen this so many times with so many stocks. I’m thinking of Rivian when it went up to 350 and then it went down later. So, look, there’s a lot of euphoria around this name, around Elon Musk, of course, and around his ambitions, uh and AI in general. So there it is a euphoric feeling for these IPOs.
