The SpaceX IPO Explained | The Complete Deep Dive

Hello and welcome back to the market maker podcast. And this week it is all about space. Space X is going public and we are going to provide you with what we believe is the most comprehensive deep dive of the IPO and all the interesting strategy and investment banking intrigue surrounding it. So here's how we're going to approach this particular story. First, we'll start with the headline and a bit of context. Then we'll go deep into the numbers. We're going to go mining if you like into the asteroid into the numbers breaking down space X is three business units and then we'll take a step back and get a sense of the space and satellite industry. How space X is oversized impact is distorting the market and then we're going to get into nitty gritty and there's no better person than Stephen on the call with me to do so. We're going to discuss space X is unique governance structure. The pre IPO frenzy which I'm sure you're already reading about the accelerated index admission and of course how much money the lucky bankers are going to make off the back of this record breaking deal before we get going quick shout out to Denise and Darious for doing such a great job for searching this story as well and helping us get to the bottom of this historic IPO. So Stephen, perhaps we can start with with the headlines. Yeah, absolutely. Thank you and I love that introduction. I do believe that it is the most comprehensive deep dive of the biggest IPO of all time and I believe that because I think I've listened to every other podcast that exists that is speaking about space X. It is such an attractive story and it's such an intriguing series of headlines and lots of different side stories. So if there's any one podcast you listen and I know we're a little bit late to the story, some other podcast went early but they went pretty superficial. We're going to get it right and we're going to do it so it comes out at the right time. Alright, so headlines. We all know anyone, it would be very strange if you're listening to this podcast or watching this on YouTube and you don't know that space X, the most exciting privately held company run by Elon Musk is going to go public and it is actually happening. I was looking on polymarket the site that helps at the prediction market site and obviously there was a real early market for when is space X going to go public and that was one of its most traded things. Obviously that's shut down now because we now know the space X, the road show, talk a little bit about what the road show is, the IPO road show is happening, well it's happening starting the private jets are going to start worrying on the 4th of June and the bell is going to ring on the 12th of June. So that is when space X goes from being a private company that we speak about so much to being a publicly quoted company. Now lots of numbers have been banded around. I think if we were to talk about space X's valuation a year ago would be putting a $400 billion number on it. That was the valuation about summer last year. Then they did a secondary internal secondary sale, so existing shareholders selling some of their shares, existing employees. That was about 800 billion in December 2025, so nice doubling. And then obviously a lot of you remember that in February of this year X AI got acquired and pushed into this entity space X bringing the total value of the combined entity to 1.25 trillion. We got the T, the big T. And now numbers again if we were to record this podcast this time last week we'd be talking about 1.75. Then if we were to record it a few days ago we'd be talking about 2 trillion. That was the number. Amazon's valuation which absolutely blows my mind. And now as of today it's 1.8 trillion. That's the number. That is the valuation of space X that we believe and that everyone, the commentary at believes, is going to go out come the 12th of June. But can I just ask that I though is interesting that they've, it's obviously the advisors or the company drip feeding into their contacts at financial media outlets to go, whoa, whoa, whoa, whoa. Let's just reign this in a little bit. The bank has definitely won over deliver on this one and not disappoint. Wasn't it just the other week we were talking about similar sort of setup with anthropic? Yeah, you don't want to, you don't want to over promise an under deliver and you don't want a failed IPO, right? And the last mega IPO that you would read about if you studied finance was the Facebook IPO, the last mega failed IPO. Share price dropped 50% within the first couple of months. Obviously look who's laughing now, but there is no chance that the bankers want this to be a damn squib because they've got a whole host of fees coming down the pipe with anthropic and open AI. And if this thing launches and then the share price halves, I would, if I was open AI and anthropic I'll be, you know, I'll be maybe stepping back from the cliff edge. I've got a question for you then because you mentioned there a lot of numbers. So this kind of this combination of it, it's a historic size, it's a record, it's two trillion. Can you just put that into some actual tangible context? What sort of size company are we talking about then? If you were to like insert this into a major one of the stock indices or a comparable that people will know as a benchmark company, for example. Yeah, this is, this is super interesting and there's lots of different ways to look at this. So firstly, we're going to look at it from a valuation perspective. We've got 1.8 trillion. That is almost as big as Amazon. It would be the seventh or eighth largest company in the S&P 500. That's by revenue as we'll get on to in a little bit, it will be about 250th. So a kind of need ranking player, the same size, I've got in my notes, the same size as general mills who make lucky charms. When was the last time you had lucky charms, aren't I? I haven't had it for years. It's what it is. I don't know, 30, 35 years ago. Yeah, there's a very, very strong correlation between me stopping eating lucky charms and me no longer getting fillings. Indeed. Yeah, I don't think they should be banned as a serial. Anyway, that's not what we're talking about. So, 2 trillion dollars, however, they plan to raise 75 billion dollars. 2 trillion dollar market cap, what they're actually raising from investors, the ask that going out on this road show to try and raise some money is 75 billion dollars. People are whole heap of money three times as much as the previous largest amount of funds raised that was Saudi Aramco, 25 billion back in 2019. But really, really importantly, if you think about a 2 trillion dollar beast, 75 billion, it's 3 to 4% of the total size of the company. So we're going to talk later on about this concept of the free float, the float. Even though we've got the 2 trillion number, there's only going to be 75 billion dollars worth of this stuff of SpaceX shares knocking around the ecosystem. Oh, I bet I've got a lot of my boxing gloves. There's going to be plenty of investors to trample over to get my hands on some of that action. Well, absolutely. So what are the 75 billion then? What do they actually need 75 billion for? Yeah, so there's a lot of things. I mean, so they're investing, obviously, extremely heavily in AI and in data centers. We're going to be talking about Colossus and the fact that this whole story, if you wrap this narrative together, it's much less about, obviously, GROC and launching new LLMs. And it's much more about the infrastructure, the picks and shovels, the architecture of artificial intelligence. Whenever we talk about data centers. Elon Musk is probably thinking, well, you could probably put one of those in space, right? Oh, and by the way, we've got rockets with the payload to do that. So the rockets send the equipment to build a data center in space. You rent out that data center and theropic pays billions and billions of dollars and you've got a multi trillion dollar company, simple. You say simple. I remember. Oh, maybe it was IBM or something like that. They said, wouldn't it be cool to put data centers deep in the ocean? Why? Because it's cool, the temperature. And then therefore, Michael, other sense, the problem is, what if there's a problem? How do you fix these things? How do you get it down there? You know, it's so, yeah, but anyhow, I digress. Yeah, absolutely. And this thing is extremely fanciful, but hey, it's Elon Musk and he has built a rocket company, a profitable as we'll find out in a minute, a profitable rocket company. So maybe, maybe this is true. But let's just bring us back down to earth to excuse the pun and talk about a couple of metrics, a couple of ratios. So on launch, we reckon it's going to be about 90 times enterprise value to room to sales. which would make it, apart from maybe Cerebrus, which is the chip company that I appeared a couple of weeks ago, it would make it the second, well, the Cerebrus is not even in the S&P 500. But it is a very, very high valuation, 250 times enterprise value to EBITDA. Right? So this is crazy. Oh, and by the way, a successful listing would make Musk the world's first, trillionaire. Oh, that's going to be terrible. I mean, it's kind of inevitable. But it is always going to love that. Shout out to Elon. Shout out to Elon. Right. So why now? Why now? So we've spoken a little bit about the fact that there are these three mega IPOs coming. And again, if you follow the financial news, you'll also realize that Elon Musk recently took open AI and some Altman to court. He subsequently lost, but what did this do? It delayed open AI's IPO plans so that space X could be front of the pile. Right? First in the pecking order to get out what will be one of three absolutely massive IPOs. That's important because all three of these companies are essentially fishing in the same lake. Right? They all want money from people that are excited and want exposure to artificial intelligence. Space X has got a different take to open AI and anthropic, but they wanted to get in early. They wanted the frenzy to build up for this IPO listing. And yeah, look, you know, if the if the heat comes out of the IPO market afterwards and if people get a little bit kind of full up with their space X allocation, they don't mind. They just wanted to be first. So it sounds like almost there's a tactical strategy. Let's go first. However, carries some risk if it doesn't deliver. So you're the first up to bat and the unknown of the magnitude of these types of IPOs when I'm thinking anthropic, for example, coming down the pipe. So you're playing a little bit safe, perhaps. So risk reward trade off, I guess. You're the first up to bat, but all of the signals look extremely positive from from a space X perspective. I don't know whether they're extremely positive from a market functioning market rational is a rational perspective. This is already bonkers. The evaluation is already dislocated from the fundamentals quite some time ago. But if you think about if you think about the fact that there's eight trillion dollars of effectively cash sitting in asset managers funds. This is waiting to be invested. So cash as an asset class is now over eight trillion dollars. That cash can very quickly be moved into something like space X. So, you know, suddenly so many five billion doesn't look so big. Secondly, we all know about how much bigger the role or more significant the role of retail investors has become. And especially in America, there's some really big pools of capital when you add it all together and 30% of the IPO allocation 30% of this 75 billion that's going towards the retail investors and we all know real retail investors they love they love a bit of mosque, right. So you know the tailwinds are there I think. And then looking at the when they did the filing the other week, you know, you got your first eyes on this prospectus. It was a beast. But it was beautiful actually a lot of the the imagery what was some of the highlights that you saw in that document. You're absolutely right. It was beautiful. There were so many cool images of rockets taking off and satellites in space. It was it was cool. The first 20 pages were all cool images scrolling and I was like scrolling and scrolling and I was like just picture picture picture, which is unusual. Look, I spent a little bit of time having looked at the prospectus. I went back and looked at two other prospectuses. The first was we work. And we work did a very similar thing. They filled their first 15 pages of the prospectus with the great community vibes right the beer on tap the beer pong whatever it might be the cool office space. A little bit of smoke amiras because the numbers were pretty tragic. Maybe the prospective investors would get bored by the time they get to the numbers. I don't think so. And then I went and looked at the Tesla prospectus and thought look as Elon Musk always been this bombastic as he always been this outrageous in his claims and in his rhetoric. And I was a little bit a little bit disappointed. Tesla prospectus was boring. There was no grand mission, no great claims and not even that many photos. So from an entertainment perspective, the space X IPO prospectus is much more interesting. Let's get some. What was your favorite stats saying him use the numbers here. Well, look, it's a really cool company. There are 10,000 starlink satellites floating around. Up above us, providing everyone from ships in the middle of the Pacific to me in the middle of the rural countryside with Wi-Fi where there was once not Wi-Fi. So that's amazing. There are 10.3 million starlink subscribers. They've had 650 launches so far. They've flown 78 crew members. They put over 80% of all of the space mass into orbit in 2025. You know, so this thing is a piece and my favorite stat and I'm going to credit mere silver arrow from prof g media for this one. So I saw it on sub stack. AI AI was mentioned in the perspective. Prospectus more times than Jesus was mentioned in the Bible. How's that for a stat? That's a highlight for the podcast right there. 1251 versus 983. Wow. And then one of the other things when I was having a scan through it because I actually did a post about this because it was a bit that jumped out to me and spoke to me. The most was was the total addressable market graph that they had or table. I wonder if you could just walk me through some of those numbers because they were epic. Yeah, so we talk about in the world of finance and the world of startups. We talk a lot about TAM, the total addressable market. And that's basically the revenue that could be taken if you get all 100% of the markets that you may or may not be able to address effectively. And SpaceX is estimated total addressable market is 28 trillion dollars. According to the digital cooperation organization which I think might be made up. 28 trillion dollars is the size of the US economy just to put that into context. And what's super interesting about this is I'm going to go through this little stack bar chart. So you've got total addressable market for space enabled solutions, 370 billion, what was the junky market? 870 billion total addressable market for Starlink. That assumes that every internet user is going to use Starlink. 740 billion additional for Starlink mobile. 2.4 trillion for AI infrastructure. 660 billion for consumer subscriptions. 600 billion for digital advertising. And then 22.7 trillion for enterprise applications. So previously all of those other numbers they're big, but you can somehow get your head around it. 22.7 trillion dollars. That suggests that SpaceX needs to take over every single software company. In the entire world, smallest to largest. Right? It makes absolutely no sense. And I think what they're trying to do here just to kind of read between the lines is one of the big things that stood out to me was SpaceX's fantastic company, but it already has an 85% market share in space. It takes take it can't grow that much bigger within the market size of space. So in order to justify a $2 trillion valuation, you need to start saying, all right, here are all of the other things that there isn't much, much bigger total addressable market for. But the problem is that the reason why I like SpaceX is because it's got an insane moat. It's got unbelievable barriers to entry. It's really hard to build a rocket company, but what they're trying to sell the valuation on is the fact that there's a $28 trillion market where SpaceX do not have a great moat. They become much like any other LLM provider, any other AI, but they're trying to sell the valuation on the market. So I think the reason why I like SpaceX is because it's really hard to build a rocket company, and it's really hard to build a rocket company. paragraph was the challenges. So here's a big fat knife. number 28 and a half trillion, it was. And then two things that they said, they said the major execution risk is the successful scaling of starship, which starship is critical for increasing launch frequencies, deploying these next gen satellites. And then the other thing, and this is kind of classic mask, but I say classic mask, but I like the fact that he says it rather than you try, he kind of owns the space, if you like. No pun intended. In the sense that SpaceX acknowledges significant uncertainty around timelines, technological developments, regulatory approvals, commercial adoption. There's so much of this that they're saying is a threat. But here's a number that we think we can gun for. Yeah, but who cares about all that when their mission is to build the systems and technologies necessary to make life multi-planetary to understand the true nature of the universe and to extend the light of consciousness to the stars? Who cares about numbers? Right? This is cool. Okay, so should we move on then and investigate the business a little bit more? Yeah, sure, let's break it down. So SpaceX is three businesses. Now that it's got XAI. It's got a connectivity piece. That's it's Starlink. It's got its space piece. That's it's bringing payload into space. And then it's got its AI piece. So connect will go through them one by one. Connectivity, Starlink, it's a really good business. And if you look at any commentator, they will say as much. It is a $11.4 billion annual revenue business growing at 50% year on year. And it generates $4.4 billion of net income. That is a really nice business. Good margins, good growth. I would invest in that at a $200 billion, $150 billion valuation. Maybe a little bit more of us feeling feeling musk punchy. Second business is the one that gathers all of the nice photos space. And that is still a pretty good business. It's a $4.1 billion business. Be growing at 8% bear in mind. And it lost about $700 million last year due to a pretty big capex build out. And then the third division. That AI, that is XAI, that's GROC, that's the data centers, it generated $3.2 billion of revenue and lost $6.4 billion of net income. So you've got an absolutely beautiful, lovely business. You've got a really good business that's got very good barriers to entry and supports that lovely startling business. And then you've got this kind of dog that you've slapped on to try and make this a big AI story. And the numbers just suggest, I mean, the AI division only grew by 22% last year. It's not, it's not, it's not going great guns, shall we say. And then no mention here then about Tesla or robotics or things of that nature. Because I'm sure I read in the last week that some murmurings about Tesla also coming into this X fold in the end as the end game. So is that not even registering at this point? It wasn't really mentioned in the prospectus. It is something that analysts acknowledge might happen at some way down the line. I think possibly it's one of those things that if you look at the Elon Musk playbook, you have the, you have a portfolio of companies and the ones that are doing extraordinarily well tend to prop up and then potentially acquire the ones that are not doing so well. And then a new narrative is created. So the way that Tesla is going with regards to its car manufacturing business, it might be that if SpaceX absolutely flies and suddenly becomes a $5 trillion company due to the frenzied stock market and things like that, their share price becomes the currency to fold a relative minnow, the $1 trillion Tesla into the fold and create a robotics AI, AI, data centers, data centers space, Wi-Fi connectivity to all the robots that are doing our bidding around the world. That's maybe where it ends. I'm not sure. Just going back to the AI part. The other business units make sense to me, but the AI part, what are they spending money on? And given the companies like Anthropic are just going vertical at the moment, one would expect to demand for data centers will go up. There's obviously a lot of private equity money I think I read just today about a new fund coming together with some PEE giants that can fund through Anthropic, more funding for buildouts. Can't SpaceX and their AI division take advantage of some of these? These tailwinds at the moment? Yeah, absolutely. And I think a lot of the narrative around their AI division is moving away from, hey, GROC is XAI is a leading lab and X has 550 million users and GROC has 550 million users and that's great. I think there's a bit of a concession that they have and will not be able to keep up with the bit with OpenAI and Anthropic and Google as well. They're building these big data centers, right? So just to look at the way that they break down their AI division or revenue and their division or numbers. So the first line is what's called, have to look this up, name plate compute draw in gigawatts. That's basically a proxy for capacity of data centers. So they have got one gigawatts worth of capacity for data centers in 2026. They only had 0.3 gigawatts in 2025. A lot of that loss, by the way, is the capex required to go into building out these data centers. So they're making a massive play on getting these colossus, you've got colossus one and colossus two data centers up and running and then effectively wetting them out. If SpaceX and Elon Musk really believed in XAI and GROC and all of that stuff, that would be the headline. That would be the, that would be on the top of the breakdown for this division, right? It'll be like number of new users added, number of paid monthly subscriptions, total revenue, total average revenue per user, all of these things. But here we've just got name plate compute draw in gigawatts. So we're really pivoting into this. We are the infrastructure of the AI revolution. You mentioned about them having a big defensive position in the space market. But when I think about some of these other largest companies in the world, the one that comes to mind, the Google's, for example, they're all fighting within this AI domain, requiring this build out and compute power. Can we just explore a little bit about the wider space industry? Who is that? How is that shaping up? I find it impossible to believe that there's not other people within this space race. And how do you get exposure to that space race in its different forms? Because I'm sure there's, you know, this is a space X is a beast and a multifaceted one. Is there any specialists that operate within like the supply chain, so to speak? Yeah, it's a really good question. I think space as a result of SpaceX is increasingly hot as a subsector or sector that investors and speculators and retail investors are very interested in. Quite frankly, if you had bought a space adjacent ETF exchange traded fund six months ago, a year ago, you would be a very, very happy person because the momentum of SpaceX, the doubling and then tripling evaluation, the pre IPO build up, the fact that it is saying some things that although seem quite unbelievable, have this, maybe it will happen ring about them, whether it's data-centered in space or mining, mining various different things up in space. The whole space industry has kind of come up alongside SpaceX. So you've got, you've got a number of players that are worth mentioning and maybe some more happily than others. So firstly, just as a note, the first big beneficiary you wouldn't have guessed it, but it's alphabet. The alphabet invested $900 million in SpaceX in 2015. So I don't know what the valuation was, but they, if you're holding onto a couple of alphabet shares, you might see a little bit of a tick up as well. Oh nice. Thanks Elon, it's not bad, is it? Yeah, yeah, yeah. It's not a bad one, is it? You never really think about, you know, a company like alphabet investing in a company like SpaceX, but it happened. So there are other companies. So I'm going to mention Echo Star. So, EchoStar, it's a telecoms company which sold some wireless spectrum to SpaceX last year in exchange for an equity stake. Importantly, has jumped more than 500% over the past year. Nice. Red wire, which is a US-listed company, to satellite infrastructure and spacecraft component company. It is up 158% year to date. Rocket Lab? Often viewed as the closest public market comparison to SpaceX, Build Rockets and Launch Systems, it is up 94% year to date. But it's not all good news. Can we, this is absolutely brilliant. Can we spare our thoughts? The poor old Jeff Bezos. Poor old Jeff Bezos is Blue Origin, which as of recording, I think Friday of last week when this comes out. On the eve of SpaceX going public, Blue Origin's New Glenn rocket exploded a put a photo in the show notes for you just to get a look at that extraordinary explosion. And it had 48 satellites due for Amazon's Leo, Amazon's Leo broadband network. It was going to send them all up to become a Starlink competitor and Elon Musk in his, in his pretty typical way. He responded to the announcement that this thing had blown up on X. He said only most unfortunate rockets are hard. That was his response to Jeff Bezos and Blue Origin. Oh, you know, they could not be better news for SpaceX in the context of the fact that their, you know, their rockets aren't blowing up and one of its biggest competitors rockets are. Bezos has got some exposure here to SpaceX, I reckon, just like Demis of DeepMine Google has little exposure to our rocket. We're all in it together. We're all bros here. Yeah, I mean, the web is very tight, right? And again, none of these people are going to go out onto the streets. So a big rocket exploding. No one was hurt. So we're allowed to laugh at it. But it's just great timing. Wonderful timing. So yeah, the space industry is definitely coming up alongside SpaceX and it is a function of SpaceX growth and the growth in the market size that will continue to propel these adjacent slightly less interesting stocks along with it. OK, one of the things then is that when I think about Tesla, I feel like Elon Musk can be a blessing or a curse in, you know, quite polar ways. So how does the governance slide of this business? How is that going to work in practice? Because I'm assuming this seems to be the centerpiece for his legacy ambition for Musk. And so his identity is going to be entirely built into this company. So how does that look given some of the challenges that he's met running his previous organization, which he would have learned a great deal from having grown Tesla. So such a degree. Yeah. And obviously he had a load of governance challenges at Tesla and obviously they ended up moving to Texas so that he could get his pay plan in place, his incentive plan in place. I think it is one of those things where you have to, if you want to invest in SpaceX, you need to hold your nose. You need to be like, look, I accept that the governance here is non-existent. You cannot sue Elon Musk. You cannot replace any board members. You cannot replace Elon. He has, well, I think 1.3 billion super voting class B shares, which give him 10 times as many votes as the normal share, which actually means that he has I think 94% of all voting rights. So this is Elon Musk company and it will never not be Elon Musk company. That is it, right? I think a US pension fund, a bunch of US pension funds got together and called it the most management favorable governance structure ever bought to the US public market. You hold your nose, right? And you go, all right. As one commentator said in the FT earlier on today, Elon Musk, you don't lose money backing Elon Musk. That was what he said. So I'm going to hold my nose. I'm going to accept that this is an absolute pig's ear of a governance structure. It's not even a governance structure. And Elon Musk could go from trillionaire to multi trillionaire, especially if he puts a permanent human colony on Mars with at least one million inhabitants, which is one of his targets, one of his key performance indicators. If you're almost get a feeling that Elon Musk threw now the space expenditure, he's almost become too big to fail. There's so much money wrapped up an interest that's interconnected without the broader ecosystem into this one individual's assets and ambition. Yeah, I find it quite intriguing, quite intelligent, strategically, but quite scary at the same time. Yeah, and it's really interesting to think. I totally agree. I think there's so many vested interests and so much money in and around SpaceX and the ecosystem around it that it does almost make this thing too big to fail. Maybe I'll look back on this podcast in a few months and I need my words. But what if I'm really interested about the strategy of Musk? I would love to know to what extent is opportunistic and to what extent it is all part of the master plan. So was it totally opportunistic that he turned, he bought Twitter and turned it into X and then turned it into an AI lab to compete with the old enemy, OpenAI? Was it totally opportunistic that SpaceX decided to acquire OpenAI four months before, sorry, SpaceX decided to acquire X four months before the listing to create this new narrative? Would it be totally opportunistic if they decided to fold Tesla in there? Or is this all part of this plan? One thing that I keep reminding myself of is that before the PayPal days Elon Musk's PayPal equivalent that got folded into PayPal was called x.com. So I know it's a different company, but there is certainly a continuity in the way that he thinks and no one can ever blame him for being short-termist. But short-termist and opportunistic is a two different things. So basically I just want to get into the mind, mind of the man, but not stay there for too long. Free physics on a cup of tea. Free physics, yeah. Exactly. Let's talk about then the finance side of this, because I know that there's a unusually large amount of Wall Street interest in this because the amount of fees to go around is enough to feed many mouths. So what does that look like in practice? Yeah, this is super interesting and again it gets back to some of the slightly more technical elements of an IPO. There are a total of 23 Wall Street lenders acting as underwriters, guarantors of the deal. So they basically guarantee that $75 billion will be put into the bank accounts of SpaceX, regardless of whether there's any investor interest or not. Interestingly enough, oh, by the way, that's probably going to equate to about a billion dollars of underwriting fees for the banks of which the lead left, the lead company, at the lead bank will get maybe up to $300 million. So who's won the mandate? Goldman Sachs. Yeah, I was quite shocked by that because I saw that come out just a week or so ago and I thought it was a shoe in for Morgan Stanley for Reasons, I'm sure you'll explain, but yeah, so what happened there? I mean, someone at MS is surely getting the hairdryer treatment these last few days. Yeah, it seems like a real case of complacency versus just putting in the hard work. So no one can say that Goldman Sachs is a plucky upstart. It is the world's best M&A bank and it is in the top three in terms of equity capital markets and has done some of the biggest tech IPOs of all time. But it was always expected that Morgan Stanley would be the lead left, which is the phrase that we use to say basically the one that's in charge, the one that has strategic control, the one that has price setting power, the one that can basically manage the whole thing and the one that gets the most fees. The reason why Morgan Stanley was so sure of themselves or so goes the journalistic comment was because of a guy called Michael Grimes. Now Michael Grimes, he is like a legendary TMT technology media telecoms banker out of Silicon Valley. He's been a Morgan Stanley. 30 plus years and he has taken Google, Facebook, Uber, Airbnb, public, right? He helps Elon Musk take Twitter private and helped arrange the financing for that. He even left, or had a sabbatical from organs d'Anlie, to go and join a similar department to the Doge department when Elon Musk stepped away and did his politics thing. So the theory was, this guy grimes, legend in the field, has helped out Musk before, has followed Musk kind of around the houses, it is Morgan Stanley's nailed on, right? But Gorman's act, supposedly, put in four years of super diligent work, right? Not just David Solomon, I think we mentioned last week, sliding into Musk's DMs and saying, "Hey, you know, we're good for this, we know how to do it." But also the really, really senior bankers in Gorman's act, probably just putting together a concerted, extremely well thought through, we are on the doorstep, we're giving you the updates, we're giving you free advice for four years, and Morgan Stanley might have just been a little bit slower, thinking we've got this, a little bit of complacency, and then bam, Gorman's act gets the big one. So you said there, at the top of this explanation, there's 23 Wall Street lenders acting as underwriters on the deal. One of the things I read in your note was something like terminology-wise, called a stabilization mandate. Most people probably haven't heard of that. What is a stabilization mandate in this process? Yeah, it's really interesting. So a bank or a number of banks will be in charge of managing the post-IPO volatility and stabilizing that volatility for a period of time after the IPO. Usually, you don't announce who the stabilization manager is. You would assume that it's going to be the lead left or one of the lead arrangers or lead underwriters. But in this case, they explicitly said that Morgan Stanley is going to be the price stabilization agent. So Gorman's act leads the strategy leads the deal. It is the one that's flying around on a private jet doing the road show, all of that stuff. But there is some credence to the argument that Morgan Stanley might actually get a bit of a better payday out of this because, and if anyone tuned in about three or four weeks ago, when we talked about IPOs and the concept of a green shoe option, there is this concept where the underwriters, they basically allocate 15% more than the 75 billion that is being raised. And then, if the share price tanks, the stabilization agent will buy those shares back in the open market at the depressed share price, bumping up demand and bumping that price back up, stopping it becoming a failed IPO, and then selling it back at the original price to the original investors. So if this IPO starts to tank a little bit, Morgan Stanley have the opportunity to having gone short 15% of the overall raise or an extra 15% of the raise, they have an opportunity to buy back in the open market, stabilize the price, and then return those shares to the original investors, pocketing the difference between the depressed share price and the IPO price. So who knows? Morgan Stanley might have an absolute, $10 billion worth of shares that they're effectively going short. So we'll see. I think that is vision in my head as you're explaining that scenario of like in the original Wall Street with Gordon Gecko and Charlie Sheen's going round and Goldman Sachs are having all the lunches and pitching and then Charlie Sheen's there sort of going, he's meeting him and trying to make sure that the share price dips so they can buy it back. Well, that's it. That's it. I don't know whether there's a conflict of interest between Goldman Sachs who obviously want this thing to be a blockbuster and Morgan Stanley who have got the price stabilization mandate really wanting to get that nice short position out there. But I'm sure everything's above board. So talk to me as well about some more terminology. Like you mentioned about retail investors and also lockups. So how does the lockup work with a period of the stabilization factor and for the price to kind of, I guess to find it's natural setting place. But then also can retail investors just get in on day one? Like how does it work from that perspective as well? Yeah. So we'll talk about the lockup and then maybe we'll talk straight about getting this thing on an index because this has been one of the hot topics in the world of finance over the last few weeks. So lockup period. Usually with an IPO, there's a pretty significant lockup period for existing investors. So you cannot sell your shares straight away because we know, as we've discussed before on this podcast, that there is a price discovery period of time in those first three or six months where you don't want a load of new shares being flooded onto the market from the existing investors. You want to get to some form of stable, you know, stable supply, normal supply meets normal demand to create an equilibrium share price that feels just about normal. So there is real logic for locking up these shares from the existing original investors for a decent period of time. Now that doesn't always happen. So in the prospectus, you can, as an existing shareholder, insiders can sell up to 20% of their holdings after its first quarter yearnings. So that's the first run on the ladder. They can sell another 10% if the stock trades at 30% above the IPO price. I, there's a nice buffer, 30% above the IPO price. If a load of supply comes onto the market, it might depress the share price but not by that much. And then an extra chance is to further sell 7% of their holdings on each occasion arising on days 70, 90, 105 and 135. So it's this kind of drip feed of selling. It's not a one year lockup, it's not a six month lockup. It is a lot of complex rules so that, you know, the share price doesn't tank and there's not a selling frenzy, but these original investors can start to make, you know, can start to get liquidity, get an exit from, from some of these, from some of these shares. And you mentioned there's a significantly large portion that allocated to the retail market. So how does that come into play? Yeah, this is a really interesting one and I don't know what your opinion on this is and but, obviously, retail has become a much bigger chunk of assets undermanagements, trading, investing, speculating, certainly relative to when Facebook and Google were IPOing, you know, 15, 20 years ago. And this is a very attractive story and a very attractive opportunity for retail investors. So instead of the normal, maybe 10% allocation to retail investors that goes by the way, through your brokerage retail brokerage platforms, you know, your Robinhoods or your hard groups, lands down to your fidelities or whatever it might be, in this case, it's 30%. So retail investors are going to get 30%, 22.5 billion of this 75 billion, right? And there is no doubt on my mind that there'll be demand there. The big question is, and we've used this analogy previously, it's, is this a game of past the parcel and does the music stop as soon as this stuff has been dumped onto the roofs, the naive meme frenzied retail investors that, you know, are a little bit hot because it's the summer and they just fancy taking a bit of a punt. But actually, the fundamentals aren't there and all the sophisticated investors know that the fundamentals aren't really there. So let's give 30% to the retail investors and they'll, you know, they'll put out some memes and they'll prop up the share price and, you know, we can all laugh our way to, you know, to the Hamptons. Yeah, I see what you're saying. I don't know. I think that what you've described from this company, I don't think it's quite the same as some of those other extreme distress companies that those particular dumps and horrors have been. So as much as there's probably the density in that view, I don't think that's the case this time, is mine. I mean, you know, the flip side is, look, this is an opportunity for many more, this is democratization of finance. We're getting more individuals sharing in the bounty of space X's upside. Obviously, the flip side to that is, well, why didn't you go public when you were a $100 billion company? And then they would have seen this rise to a multi-trillion dollar company and that would have been at the behest and known by the retail investors. So staying private for longer doesn't really help the retail investors. See, you said something interesting earlier and that's something that I haven't investigated. Perhaps I should have done 12, 18 months ago as you said earlier, but we were just talking then about investing into space X directly. What are these space ETFs? And like, what other mean of exposure that investors could get that kind of second order to the SpaceX moves. Yeah, absolutely. So you can invest in a mutual fund or an exchange-traded fund that has exposure to private companies. That has exposure to SpaceX. So for example, the UK-based closed-ended mutual fund, Scottish, Scottish mortgage investment trust, one of the big ones, 18% 17.9% of its portfolio is SpaceX. So they are a fund that you can buy and sell shares in, you know, on the market, but part of their holdings are extremely illiquid private companies. If anyone knows their financial history, this feels a lot like Neil Woodford and the Woodford fund. Oh yeah. There is a real problem. It feels quite nice to say, all right, here are these private companies. A sophisticated fund like the Scottish mortgage investment trust would get access to private, you know, large private company fundraisers. So they can stick a slice of privately owned company within their overall portfolio. But the danger is these portfolios are liquid, right, these funds are liquid. So I need to be able to take out as much money as I want from that fund every single day, right? It's a traded fund or it's a, yeah, or it's an exchange-traded fund. So if too large a percentage of your mutual fund is held up with super illiquid privately held companies and suddenly everyone wants to redeem their money, which they're legally allowed to and they have the right to, that's when we've got a problem. So the fact that Scottish mortgage investment trust has 17.9% of its portfolio in SpaceX, you know, that's a pretty chunky amount and they're, they're a rules that govern the amount of liquid assets that are allowed to be held within a mutual fund structure. I mean, I was kind of laughing at the beginning because I was kind of thinking of like an old grand mar and she sees, oh, the Scottish mortgage investment trust, yeah, that would be great for my hard-earned life savings. That sounds really stable and I don't know how you can pull off the marketing around the compliance side of that and it's 20% in SpaceX. It's ludicrous. It is quite bonkers and it's definitely something that's worth taking a look at and again, it's all good if you get on the right side of it and you invest in a breakout company like SpaceX. But if you get on the wrong side of it, again, we've referenced the Woodford Fund and people can take a look at what happened there. If you have, if these investments in private companies go the wrong way, suddenly you're left with no money to return to your shoulders and it's, again, your old granny would have a bit of a fit. All right. The final thing to close on then was something that also caught my eye from the headlines in the last week was just about the accelerated nature of getting this stock on the index and it was like to the Nizy, the Nasdaq and it almost felt like again, we talked about the incentives of all the participants involved in the ecosystem around this company. It almost felt like, yeah, we can change the rules. You're so big, so powerful and important. We'll just rip up the rulebook for you. So what happened here and why is it important? Why is it a talking point? Yeah. So, I mean, the kind of subheadline to the main headline is that Nasdaq and Fuzzi are fast tracking SpaceX into its most heavily tracked indices. S&P is going to do the same. We just don't know when. And this basically means that SpaceX will become a constituent part of a passive ETF or a passive portfolio that is tracking a particular index within a few weeks of it going public. You might say, well, that's a great thing because that, you know, we want the biggest companies in the world to be part of the biggest indexes in the world and it would look really quite weird if the S&P 500 didn't have a company like SpaceX in there super quickly. But there are a couple of things here. So firstly, there is a reason why there is a six to 12 month waiting period between going public and getting entrants to these indexes historically, that is. And that's because of what we spoke about before. There's a lot of volatility. There's a lot of price discovery. There's a lot of ups and downs that happen between going, you know, having your IPO and then having that degree of stability and understanding about where your price sits. And if you stick something straight into an index, then those volatility is going to potentially distort the performance of that index, certainly during those early months. Now, interestingly, the S&P have a bunch of rules, which obviously are being flouted by SpaceX. The market cap has to be higher than 22 billion. Well, that's right. It must report positive net income over the recent quarter, wrong. And over the last four quarters, also not achieved by SpaceX. And this, by the way, is why Tesla wasn't allowed in the S&P 500 for so many years. It's kind of staggering now that it wasn't. But it took seven or eight years between IPO and S&P 500 admittance. And then this is super interesting. At least 10% of the company's total outstanding shares must be available for public trading. This is the free float, what we spoke about right at the top of this episode. Tesla's? 3 to 4%. 75 billion over 1.8, 1.9 trillion. That's a tiny, tiny, tiny free float. Microsoft, just as point of comparison, 99.9%. In a video, 96%. So, so the reason why the reason why the S&P will want at least 10% is you want, you want enough if you think about if you think about a $2 trillion company where that valuation is being determined by only 75 billion dollars worth of liquidity, then effectively relatively small buy-and-sells can have a order of magnitude bigger impact on a $2 trillion market cap, right? And therefore, you will expect to see SpaceX's market cap move around quite wildly because it's being controlled by 75 billion. As opposed to Microsoft, which is 99.9% public float. The last thing to note here is that most of these indexes, and this is something that I learned really recently, I have to say, most of these indexes are float adjusted. So, you might think, all right, you know, as soon as this, you know, my main, personally, my main investment is in the S&P 500, right? I might think to myself, well, I don't need to go in on SpaceX because within a couple of months, you've got $2 trillion worth of SpaceX slotting its way into the S&P 500, seventh biggest company if it does well, the S&P 500 does well, but that's not the case. The waiting is determined by the free float. So, it's not the market cap, it's the free float. So, in the S&P 500, the index, if and when SpaceX gets to become a part of it, even though it's a $2 trillion company, that 75 billion of free float will make it approximately 0.1% of the overall constituents of the S&P 500. So, actually, you're not going to get that much exposure to SpaceX by getting into the S&P 500 and thinking it's a $2 trillion company. Can you just, my naivety here? So, Microsoft's almost 100% public float in video 96, Amazon's 91. Why is Tesla so low and SpaceX so low? What is the strategic benefit of the business owner or management team to go one way or the other? It's a function of control. The bigger percentage that is owned by private shareholders, especially if your name is Elon Musk, the more voting rights you have, and obviously there are structures to turbocharge that as well. If you are 99.9% public float, you are well and truly a public company. And if you think about an annual general meeting, you can get voted down very easily with 99.9% free float. And the other justification for a large free float is the need to raise money. So, Microsoft's been a public company for 50 years. It would have gone out to the market. I don't know how many times, tens, hundreds, thousands of times, to go and raise more money, which means selling more shares, which means more public float relative to the increasingly small amount of private investment. And also, by the way, you know, if I'm Bill Gates, I will want to decrease my holding over the course of 50 years, and again, sell strategically into the market when I feel is appropriate. I might have had 20% on IPO day, but as times have gone on, because it's been around for a long time, I'm going to sell down, and it's 99.9%. So hopefully that explains it. Cool. Well, I think that was a deep dive, definitely by definition. So hope everyone found that really interesting. It's going to be fascinating when this all pans out in the coming weeks and months ahead. I'd love for you to put into the comment section your thoughts. What do you agree with? Disagree with? Do you think this is the chance of a lifetime? Do you think this is crazy town? Like, put what you think. I'd love to see a validation behind your arguments and whatever that you have. And yeah, we can see how this is going to play out. So Stephen, thank you as always for sharing the insights and look forward to our next conversation. Thank you, Ren.