The successful offering of Elon Muskโs SpaceX over the weekend has share markets bracing for the IPOs of two artificial intelligence megastocks โ Anthropic and OpenAI โ which will also need to raise unprecedented amounts of cash from the public.
Muskโs rocket, satellite communications and AI conglomerate had the perfect debut on Saturday morning (AEST), closing at a 19 per cent premium to the $US135 ($191) that fresh investors paid for each share โ including tens of thousands of Australian buyers.
It is not known how many local retail investors have ended up with SpaceX stock through the IPO process, but Commsec, one of eight brokers in Australia offering IPO stock to investors, closed off its orders after 30,000 customers applied for shares.
SpaceX is the biggest public offering in history both in terms of the value of shares sold, $US75 billion, and valuation of the company before listing at $US1.77 trillion. The company is now worth $US2.1 trillion ($2.98 trillion). SpaceX was valued at $US180 billion less than two years ago.
But the numbers that worry professional investors who have decided against buying into the float include the fact that the valuation represents roughly 100 times revenue and the company is losing billions of dollars a year.
SpaceX, Anthropic and OpenAI could raise $US200 billion between them this year.
โInvestors really have to consider that itโs almost like buying a lottery ticket,โ Datt Capital principal Emanuel Datt wrote last week.
โIf it turns out really well, perhaps it may be justified in the fullness of time. I have some scepticism around buying any business at 100 times sales, especially at this sort of scale.โ
AMP chief economist Shane Oliver said the outlay of cash by investors was unprecedented, with the $US75 billion SpaceX raised from investors almost matching the $US77 billion raised on US markets last year.
He said SpaceX, Anthropic and OpenAI could raise $US200 billion between them this year.
โOn the one hand they add to hype around the market, with many wanting to get on board. On the other they suck cash out of the market which can be a drag for future gains. I wouldnโt rely on them as a timing indicator though.โ
Anthropic and OpenAI have both lodged IPO documents this month and have announced their intention to float this year. Analysts expect them to have valuations just below $US1 trillion.
Pengana Capital, one of the few local fund managers which had invested in SpaceX before this yearโs IPO, flagged to investors that its shares would be subject to post-IPO selling restrictions.
โAs is quite common in the market, pre-IPO investors are typically subject to post-IPO lock-up restrictions (most commonly 180 days) that help to support an orderly market. The SpaceX shares held in PE1 will be subject to lock-up periods of differing durations, after which any sales would likely occur progressively rather than immediately,โ it said in an investor update just days before SpaceX debuted.
Wealth management group Insignia Financial, owner of MLC, was one of many sitting on the sidelines.
โMLC invests via a multiโmanager approach, combining specialist in-house and external investment managers to construct diversified portfolios,โ a spokesman said.
โOur external investment managers are not currently participating in the SpaceX IPO, and any future exposure is expected to be limited and primarily through benchmark index inclusion.โ
Index inclusion will drive further demand for the stock as fund managers and exchange-traded funds (ETFs) which track market indices like the Nasdaq and S&P500 are forced to buy SpaceX shares to keep track of these stock market indexes.
It will provide a further potential boost for Pengana Capitalโs stake, as one of its investment specialists, William Dougall, pointed out on investment website LiveWire recently.
โWhen a company enters a major index, every vehicle tracking that index will buy its shares. This buying is mechanical, price-insensitive, and compressed into a short window,โ he said.
โFor a company the size of SpaceX, listing into a market where index providers have rewritten their rule books specifically to accelerate inclusion, the scale of this forced buying is unlike anything the market has previously absorbed. The same dynamics will apply, in varying degrees, to every mega-cap IPO that follows.โ
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Colin Kruger is a senior business reporter for the Sydney Morning Herald and The Age.Connect via email.
