From a historical perspective, this argument doesn’t hold water, as the most efficient method has always won out. For example, reasonably-priced mom&pop grocery stores existed before supermarkets, but supermarkets were scalable and could provide the same or better service with a lower energy input. As the mom&pop shops lost market share, their required energy input was forced up, pushing up costs and making them less competitive. And this same pattern has always been visible across all industries.
Sure, people may prefer to support a mom&pop shop rather than a soul-destroying corporate store, but only a niche will actually put their money where their mouth is. Same with handmade vs. machine-made.
In the case of telecom, I would consider it safe to assume that satellite constellations require far less energy input than terrestial telecom networks. Add to that scale (global market) which would allow for profitability even with very low end-user pricing, plus convenience (no need for roaming, travel SIMs, global network cover, etc.) and it becomes hard to imagine legacy providers with their small markets and high running costs having much space in the future telecom market. The competition will likely be between a few big satellite constellation operators, compared to the 10s of thousands of telecom companies we have today.
And that’s just one example of the massive potential for monopolization enabled by the 4th/5th industrial revolution (or whatever you prefer to call it).
But…that’s just my personal hunch. Time will tell.
Says Wikipedia: “Sales are capped to a few hundred fixed users per 20 km (12 mi) “service cell area” due to limited wireless capacity”
So they basically offer “cellular” internet. From space. The irony. With the costs that come from sending limited service life satellites into space.
While the company itself seems to he a bit coy about the details of those limits, they indeed seem to be a thing according to other sources
Edit: I mean, not surprising, given how it’s basically “radios”, and frequency spectrum is limited. Terrestrial providers and applications (Wi-Fi) are taking up a huge part of the spectrum for high-bandwidth applications already today. Their cell station coverage is limited though, so you can “reuse” bandsfor multiple cells within a relatively small area.
The goal of investment banks is to help the shareholders of the companies they serve to get the highest possible price for their shares in an IPO, with figures and projections being adapted to achieve that. Always best to wait till the market finds the true price, which is generally lower.
It would be great if there were index funds that accounted for that, but I suppose that would be a form of active stock picking.
I was reading a blog post where the author was commenting on the S-1 and I found this amusing:
“In all seriousness, the numbers are obviously absurd, but then again, everything about this IPO is absurd. SpaceX is seeking a $2 trillion valuation on a mere $18.67 billion in revenue with $4.9 billion in losses last year, and growth actually slowed from 35% to 33%. That slowdown happened despite the addition of xAI (and thus also X), which tipped the company from a small profit to that massive loss, thanks to $5.1 billion in AI R&D expense. That R&D, keep in mind, went towards building a model that is in 5th place, and whose entire founding team recently left the company. But sure, $26.5 trillion AI opportunity!”
However, the writer goes on to say:
“This is not to say that SpaceX won’t get its desired valuation. Tesla’s valuation never made any sense right up until the Models 3 and Y actually worked out, causing Tesla’s share price to soar (and even then it was hard to ever build a financial model that justified the new share price). Musk’s ability to make his own reality starts with investors”
So if you believe the story and you believe Musk, why not? But it is not very rational even though it may be a nice investment with some “gambling money”… which I believe we all should have anyway (and why I bought bitcoin many years ago )
Will apply to all the megacap IPOs tho (OpenAI and Anthropic for instance).
To be fair people would have complained either way, and I’m not sure why it’s better to wait (if anything for float based inclusion, it will have less impact if it gets added early, otherwise that’s even more front running happening 6 months later when it finally gets included with a larger float).
I don’t think there can be a way to introduce megacap into a passive index that won’t make people complain. Passive index won’t have a smooth time when you do sudden change to the biggest companies (IPO, or index inclusion like when tesla finally passed the SP500 criteria and joined in the top 10, for the index investors in the end it probably would have been better to have included it earlier rather than later).
Anyone with strong conviction that as an index investor they’re getting screwed could probably hedge it with derivatives (and given the popularity of derivative with meme stock, there should be a fairly liquid market well before index inclusion kicks in).
The post-IPO loss also isn’t as sure in the US stock market. In Switzerland, I haven’t yet seen an IPO where the stock was not overvalued with a major price correction afterwards.
Who? You want SpaceX, you buy it. Someone put rules to avoid problems, you remove them, you’ll pay the price.
This is probably the right place to start the “cronies” blabla thing, but ofc its too political.
I can’t find non AI sources other than this:
Prices go down. 6 Months is the usual period when original stock holders can sell.
edit: I can’t watch videos right now. Does this video add more info ? (admin you can delete it if it’s bad)
The rules were never made for megacap IPO, they were already very problematic for Tesla back in the days.
Waiting longer so that the float is 2-5x higher makes the problem worse IMO.
I know that it’s a topic the outrage based financial scene has seized on, my feeling is that most balanced reporting don’t see a big problem with it, for float based indexes (I agree nasdaq is a problem tho). Or at least it’s unclear why waiting longer will give a better outcome.
Personally I do passive, I know it comes with good and bad (and I’d still prefer minimizing the amount lost to hedge funds on index rebalancing, which probably would get worse if you wait longer). If I was truly convinced that it’s bad it seems easy doable to put my money where my conviction is and buy some options.
Afaik VT and VTI have also followed fast inclusion rules for a while, nobody complained.
For example the response to the outrage on social media from the head of global equity at Vanguard:
By tying inclusion to what investors can actually buy, indices stay grounded in economic reality rather than reacting to the excitement surrounding the deal.
Fifty years ago, indexing offered investors a simple proposition: participate in the growth of markets without needing to outguess them. That proposition still holds. As IPOs grow larger and structures more complex, the value of disciplined representation only matters more.
Investors actually can’t actually buy most shares of SpaceX. Their free float is reportedly below what index inclusion would normally require.
The NASDAQ index weighting also won’t correspond to „what investors can buy". They’ll adjust its share of the index by a (reportedly) 3x multiplier or so.
This is manufactured scarcity, not reflecting what investors can actually buy.
S&P rewrote to rules to waive the profitability requirement.
Let’s ignore the nasdaq rules (I agree they’re stupid, the whole idea of nasdaq index is pretty weird to begin with).
Kinda by definition if you have a float weighted index, the amount of float doesn’t matter just the fact that there’s a market and liquidity. Given the size of the IPOs it’s hard to argue that liquidity won’t be there (there’s a lot of companies being traded with a float weighted market cap that’s much smaller than the IPO amount. (That’s what the article explains)
My feeling is that the main outcome of this outrage is to anchor the spacex stock solidly into meme stock territory (the discourse is that it can only go up since indexes will make it go up). Meme stocks tend to be self fulfilling, so if lots of retail believe that, they’ll all pile on in the IPO reinforcing the meme stock status. Which is kinda funny since a lot of the people discussing that are generally dubious of SpaceX/Musk/AI Investment but it might instead help prop it up
I mean, if you won’t hold SPCX no matter what, you don’t care. Meme stocks can meme all they want outside of your (my) portfolio.
And if you do hold SPCX through some index fund and it does go to the moon (pun intended) in part because you have ranted against it, then you got to both rant and make money out of it, which can be seen as the best of both world by a decently large part of humanity of which I am.
And if it goes down, you have had the pleasure to be right and be vindicted, which somewhat compensates for the few money you’ve lost in the process.
What’s not to like? That is, as long as there are ways to avoid those meme IPOs (and there are) and everybody still has a choice of what they want to hold in their portfolio.
S&P Global said on Thursday it was not changing the requirements for entry into its major indices, dealing a setback to Elon Musk’s SpaceX by effectively ruling out a swift entry for the world’s biggest-ever IPO into the benchmark S&P 500 index
Below 0.5% at IPO, potentially more later as float increases.
Edit: for back of the envelope calculation, I believe Nvidia is roughly 100% float, SpaceX would be 5%, scale the market cap accordingly (and Nvidia is like 4% of VT).
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(and given the popularity of derivative with meme stock, there should be a fairly liquid market well before index inclusion kicks in).
