If you didn’t buy SpaceX shares in the first minutes of trading after the IPO, then you’re probably under water.
Shares are having a rough day today as the hype machine dies down. It’s lower by 10.5% to $165.64 and the decline comes after the company filed to sell senior unsecured notes for at least $20 billion. The shares — like the IPO sale — is going to be used to pay back a bridge loan and for ‘general corporate purposes’, which is boilerplate language.
The thing is, the company hasn’t generated any growth capital in all the fundraising. That doesn’t point to a company that can aggressively fund growth when its two main business lines — rockets and data centers — are massively capital intensive. The company did disclose cash and cash equivalents of $100.8 billion today (due in large part from the $75 billion IPO). At least $20 billion of that will go to the bridge loan.
The problem for the shares — aside from the company trading a massive premiums — is that insiders and employees will have lockups expiring after Q2 earnings results (likely early August) and staggered through year end. That’s going to be a big problem and could add to downside momentum if shares look like they’re sliding. The psychology of that is simple as employees will be increasingly likely to sell shares if they feel their net worth is slipping.
The bulls are pointing to index inclusion as a saviour but that buying is often front-run and sterilized so I would be cautious of a sell-the fact trade on it, as it’s a one-off. At the same time, as the float rises, it will be possible to short it.
Ultimately, the company will be judged on earnings and it lost 67-cents per shares in the 12 months through Q1.For the current quarter, the consensus is -0.23 in earnings at $6.23 in revenue. That’s a long way from justifying a $2.2 trillion market cap but “data centers in space” right?
