Investors weigh pros and cons of boarding Elon Musk's $2 trillion SpaceX 'rocket'
Based in Texas, SpaceX operates rockets, spaceflight, telecommunications, and AI. (Reuters: David Dee Delgado)
In short:
Investment analysts are split on whether SpaceX's stratospheric gains on its Nasdaq debut will hold, with one firm rating it a "sell".
However, others point out purchasing SpaceX stock is less about analysing fundamentals, and more about getting on board with a company that may change the way we live.
What's next?
Some analysts expect SpaceX's debut to trigger a reshuffling of investor portfolios, creating selling pressure on other technology heavyweights.
At the launch of trade, the share price took off like a rocket.
Elon Musk's SpaceX, once a private company, is now officially trading on the stock market.
It finished trading at $US160.95, leaving the company well above a $US2 trillion valuation.
Based in Texas, SpaceX operates rockets, spaceflight, telecommunications, and AI.
But Musk now wants to establish a self-sustaining city on Mars with at least 1 million inhabitants and put data centres in space.
"It's going to take a lot of technical innovation to make that happen," Bloomberg's Michael Hytha said.
"And the capital expenditures are just amazing right now."
Elon Musk said the company needed the cash to grow.
"We are embarking on a new growth phase, and we need capital for that," he said.
SpaceX shares jumped 19 per cent in their Nasdaq debut on Friday. (Reuters: David Dee Delgado)
And a larger-than-normal, 30 per cent, of the share allocation has been set aside for mum and dad investors, worth around $US22.5 billion.
"We think it's worth less than it's being sold for, but the band of uncertainty here is enormous," Morningstar Equity Market Strategist Lochlan Halloway said.
"Some shareholders will see value in it, some won't.
"But I think we have to recognise here that the key point is a lot has to go right for this company, price where it is, to make sense as an investment."
Australian investors have been offered shares in the company and can buy SpaceX through a local stockbroker.
But whether you choose to invest in Elon Musk's space mission or not, you'll still likely end up taking a stake in the company.
"If their superannuation allocation has some exposure to the US, the NASDAQ, for example, passively involved in the US at index weight, they will pick up some SpaceX shares through this IPO process," Mr Halloway said.
"[That's] because it has been fast-tracked for inclusion into the NASDAQ, which means it's going to come on quicker than usual, and it might wind up in some Australian allocations in super or perhaps their direct shareholding accounts if they are subscribed through it directly."
Loading...Mr Halloway said it's a "blockbuster" initial public offering (IPO).
"We've got rockets, we've got AI, satellites, Elon Musk."
"All of these things are coming together, a confluence of factors, just to make this an absolute blockbuster."
Mr Halloway said the investment was not without risk.
"You know, especially as I said with the core satellites business, which many people might be familiar with, it is a good business, and it's funding a lot of the other loss-maker bits."
"We think that SpaceX stock is worth about half of what it's being sold at in the IPO.
"But look, Musk has defied his doubters before, and he can build a business," he said.
Analysts split on company's true value
Although SpaceX's lack of profitability makes it ineligible to join the S&P 500, its expected fast-track inclusion in the Nasdaq 100 will soon make it a major holding for passive funds and ETFs (exchange-traded funds) that track the index, creating a fresh source of demand for its shares.
It will take about a month before SpaceX gets added to that index under Nasdaq's new fast-entry rules, as opposed to a typical wait of as much as a year.
Some analysts expect SpaceX's debut to trigger a reshuffling of investor portfolios, creating selling pressure on other technology heavyweights as funds rotate into the stock.
On Friday, shares of other space firms and satellite companies declined sharply, with Planet Labs down 9 per cent and EchoStar down 11 per cent.
SpaceX said its market opportunity spanned $US28.5 trillion, a figure it called the largest in human history.
With its leading position in space — the firm says its operation is responsible for more than four-fifths of the mass launched into orbit over the past three years — and revenues from Starlink, some investors said it had a strong foundation upon which to build.
Some analysts have already issued positive ratings on the company, but Morningstar analysts this month said it was more fairly valued at around $US780 billion, and CFRA on Friday started coverage with a sell rating.
"This is not a name you're buying based on fundamentals. For me, the analogy is Amazon. This was a company that changed the way we live," said Nancy Tengler, CEO and CIO of Laffer Tengler Investments.
ABC/Reuters