SpaceX Has Competitive Advantage Ahead of IPO, Says 'Mr. IPO'

0:00 They call you mister IPO. So, mister IPO, tell us as to how we see a vindication in the market capitalization of SpaceX as it goes public. Because as Ed was writing in his newsletter today, an awful lot has to go right. I'm in complete agreement. An awful lot has to go right, but this is a great company. As Lauren was indicating, Starship is an incredible engineering feat. It's complicated, But this is actually a competitive advantage. It's so difficult for a competitor to come up with something similar that's gonna be able to lower launch costs as much as SpaceX can, that it's gonna allow SpaceX to have a a big technological lead over any potential competitor. And this will allow it to put Starlink satellites into low Earth air orbit and offer Starlink Internet access at much lower cost than competitors can.

1:09 Jay, professor Ritholtz, you are called mister IPO, if you don't mind me saying, because you're probably the most influential, most cited academic researcher in the field of IPOs of the last forty years. What is different about this IPO, and what is the same as those that you have studied deeply in your career? Well, what's different is this is gonna be the largest private sector company ever to go public. Valuation of something like $1,500,000,000,000, dramatically higher than, any other. Of the big companies that that have gone public in the past, they've generally been large state owned enterprises with, very large operations and profitability. This is a company where the market and venture capitalists, have been valuing it based upon enormous, potential future profitability. But, as was mentioned previously, a lot of stuff has to go right to justify this valuation.

2:21 When you think about just the multiples that are gonna be digested, and I know you've looked a lot into that, where does it sit in past in historical terms compared to those that did list? Because as we've been talking about time and time again across this entire network, look. Companies are staying much longer private, and they're coming in extraordinary valuations. And so you wonder how much money is left on the table for a retail investor or a different type of investor that hasn't been funding it from day one.

2:48 Right. This is a company where last year, had $18,700,000,000 in sales, you know, bigger than just about any, tech startup or or, you know, private company that hadn't already been public, has in terms of revenue at the time of going public. But, it's also got, the the really huge valuation. And to justify a 1,500,000,000,000 valuation, very big future profits have to be there. There have only been about 18 companies that have gone public in The US with inflation adjusted revenue of at least a $100,000,000 per year and a price to sales ratio of more than 40 At a 1,500,000,000,000 valuation, SpaceX is gonna be going public at a price to sales ratio of about 80. So there there haven't been all that many companies that have done this before. But of those that have, on average, the stock has been a disappointment to investors. Lots of things have to go right.

4:08 Lots of things have to go right, Jay. Repeated throughout the s one is a warning that they will be constrained by compute now in the future, and Starship has to work. Very quickly, is that just boilerplate or they have to say that? You know, it it's technologically true that that the of sending people to Mars is very questionable, but the ability to get things going in in the foreseeable future with Starlink can be an enormous source of profits.