This might sound weird because I’m not a space and computer nerd.
And I’m not participating directly in the SpaceX IPO…
But I do love how this IPO is setting up.
And how SpaceX’s own Starship launch is an analogy for what we’re about to see.
To be fair, I had to look up the stages of a Starship launch (but that was fun).
Check it out…
Source: SpaceX.com
Starship launching.
It takes a LOT of thrust to get Starship off the launch pad (roughly 18 million pounds-force)…
Liftoff and the IPO Roadshow Kickoff
SpaceX’s IPO might even be the easier of the two…
Starship Launch: The Super Heavy booster’s 33 Raptor engines ignite, creating massive thrust to get Starship off the launchpad.
SpaceX IPO: The company dropped this SEC filing in May (amended June 3), and launched the roadshow last week.
Hype is building with oversubscription reports.
And 21 of the most powerful financial institutions on the planet are working together to get SPCX off the pad.
Source: SpaceX Roadshow Presentation
Max-Q (Maximum Dynamic Pressure) and Peak Regulatory Stress
During launch, there’s a point of max pressure where structural integrity is proven (or not). Not so different from an IPO…
When Starship launches, it takes about 50-60 seconds for it to reach peak aerodynamic pressure.
The SpaceX IPO is similar.
For the past couple of weeks, there’s been both support and pushback for the expected valuation.
For example, Morningstar values SpaceX at ~$780 billion versus the $1.77 trillion target.
Who’s right? The market. Always.
The market will decide. But there’s no doubt that pressure is building.
MECO (Main Engine Cut-Off) and Private-to-Public
SpaceX has been around for 24 years. It has revenue, but for years, its only funding was private equity (that’s true of all big tech startups).
Private equity is like Super Heavy booster engines. Eventually, they get cut off.
When Super Heavy’s main engines cut off, the heavy lifting is done. The rocket is at a high altitude and moving FAST (roughly 5,400 mph).
On pricing day (expected on June 11), there will be initial trades.
Early private investors and some employees will get liquidity. When the IPO happens the next day, the private equity “main engine” gets cut off.
Its work is done.
Hot Staging, Post-IPO Volatility, and Nasdaq’s Fast Entry Rules
This is where both Starship and the SpaceX IPO are different from their competitors.
Hot staging is unique to Starship. The upper stage engines ignite while still attached to the Super Heavy booster.
Supposedly, it’s very efficient. It looks very risky.
For the SpaceX IPO, this will be the “hot” post-IPO period.
Many of the best IPOs pop 19%-20% on IPO day. We’ll see what happens with SpaceX.
But there’s one other thing about the SpaceX IPO that is brand new. Check out this headline from The Wall Street Journal…
Source: WSJ
Around 15 days after initial trading begins, Nasdaq’s new “fast entry” rules mean SpaceX is likely to join the Nasdaq-100.
Talk about hot staging. It’s like a mini-boost before the second stage burn.
Second Stage Burn and Life as a Public Company
This might be the most boring part of both the Starship launch and the SpaceX IPO. Most of the exciting parts are done unless there’s a “RUD” (see below).
When Starship’s second stage fires, it gets up to orbital height and speed.
For the SpaceX IPO, this stage will be the company going through the regular cycle of quarterly earnings, reports of Moon and Mars milestones, Starlink subscription numbers and even big data center deals like this one with Google.
Orbital Insertion and “Escape Velocity”
Once it’s at the right altitude and speed, Starship will be orbital.
So far, the tests have been high-altitude suborbital. Which means it hasn’t done this yet. Sort of like SPCX…
SpaceX still has to prove itself for the pre-IPO valuation to stick.
That said, it does have multiple revenue streams and big ambitions. To da mooooon!
There’s ONE MORE way the SpaceX IPO could be like a Starship launch (and it would be wrong not to include it).
High Risk of Rapid Unscheduled Disassembly (RUD)
Yep. Explosions.
Early Starship tests (and launches) have ended in spectacular fireballs.
IPOs can “explode” too.
I’m not saying that will happen with SpaceX, but there’s always a risk.
One thing SpaceX has going for it … it tends to celebrate failure as a way forward. (Not so different from learning to trade, right?)
SpaceX Catalyst Watch
I hope that was as fun for you as it was for me learning about rockets.
Remember: Sometimes the biggest opportunities come from the sympathy plays, not the headline stock.
While everyone watches a SpaceX IPO, related lower-priced stocks could see major moves.
Note: We’re not the only ones who think there will be a flood of opportunities around the SpaceX IPO catalyst. In fact, our friend Jon Najarian just issued a shocking prediction on it. Click here to watch it now before Friday’s IPO.
If you have any questions, email me at [email protected].
Cheers,
Tim SykesEditor, Tim Sykes Daily
