A private jet with 200 fund managers just flew to Starbase in Texas. They’re trying to decide how much to invest in the IPO. And what stocks they’ll sell to raise the capital to invest in SpaceX.
A week and a half ago, SpaceX chartered a jet from Newark to its Starbase facility in South Texas. |
Nearly 200 investors from the world's largest mutual funds and ETFs were on board. |
These fund managers are trying to decide if they’ll buy SpaceX IPO shares. Plus, they need to determine how much of their portfolio to allocate to the newly listed stock. |
Go here to claim Pre-IPO shares now. |
SpaceX could have a roughly 3% allocation in the S&P 500, based upon an expected market valuation of $1.5 trillion. It’s likely that many tech focused funds will invest at least 3% of their portfolios in the newly public stock. |
The IPO is expected to start trading in 45 – 60 days. And Wall Street funds are now scrambling to figure out what to sell to make room for SpaceX shares. |
The short answer: the Magnificent 7. |
Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla are all on the chopping block. Fund managers need liquidity, and these are the most liquid names they own. The Bloomberg Magnificent 7 index rose 14% in April alone, which means managers sitting on gains have even more reason to trim. |
T. Rowe Price's Tony Wang runs a $12 billion science and technology fund. He said he thinks about the SpaceX decision "in the context of the Mag 7" and "what has the biggest risk-adjusted return." His current top holdings are Apple, Nvidia, and Broadcom. |
There's also a specific Tesla dynamic worth watching. |
Ross Gerber manages a $4 billion fund. He says SpaceX will cause investors to sell Tesla to buy SpaceX shares. He already owns SpaceX privately, and plans to sell some as soon as the lockup allows after the IPO. He thinks the current $1.25 trillion private valuation is too high — but he's not waiting around to find out. |
Microsoft is another candidate. The stock is down about 25% from its October high, making it a tax-loss harvesting target for funds looking to offset gains elsewhere. |
There's a real irony in all of this. |
The Magnificent 7 companies collectively print enormous amounts of cash with steady growth trajectories. SpaceX posted a $4.9 billion net loss last year. Its growth story is tied to a next generation rocket program that isn't yet commercially viable. |
But the demand is clearly there anyway. |
A Goldman Sachs report noted that mutual funds have historically held more cash ahead of major IPOs. That shift hasn't happened yet — which suggests the selling pressure is still ahead of us, not behind us. |
The roadshow is expected in the coming weeks. Once the S-1 goes public, investors will finally have more clarity on the company’s actual financial performance. |
I'm not waiting for the filing to position myself. |
Here’s how to secure your Pre-IPO shares today. |
Ian Wyatt
Editor, IPO Watch |
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