Is Space X Crashing?
Friends,
Today, on their first day of trading on the Nasdaq-100 stock index, SpaceXβs shares dropped 6.8% to $149.47. Thatβs above their IPO price of $135, but down from a peak above $200, and below the $150 price where shares began trading on June 12.
SpaceXβs decline disappointed investors who wagered that inclusion in major indexes would provide a boost to the shares.
But, what about all the Americans who didnβt even know they were buying into SpaceX, but whose savings are in index funds linked to SpaceX and the Nasdaq-100? Theyβve been taken for a ride.
On May 1, the Nasdaq 100 implemented a new βfast entryβ rule that included companies among the top 40 most highly valued in the U.S. β which put SpaceX on board automatically.
The result: A big chunk of Americansβ retirement savings and pensions (as well as university endowments) are now automatically tied to SpaceXβs market value.
At the same time, all that automatic infusion of investment was expected to jack up the value of SpaceX, at least in the short term.
If todayβs launch is an indication, that didnβt happen.
SpaceX insiders β such as Musk and, reportedly, senior Trump officials β can sell their shares sooner than is usually the case with an IPO, because thatβs the way the SpaceX IPO has been structured. Which means they can enjoy the stocksβ upward tide as the major indices have essentially forced millions of investors to buy it, and then they can still exit SpaceX before the tide runs completely out.
If this sounds to you like a Ponzi scheme, it does to me, too. SpaceX may turn out to be the universeβs biggest Ponzi scheme β with the possible exception of Trump meme coins.
Of course, the Nasdaqβs overall weakness today didnβt help. Weighed down by semiconductor stocks, the Nasdaq composite fell 1.2%. The S&P 500 dropped 0.4%. The Dow Jones Industrial Average slipped 0.2%.
But investors have been nervous about SpaceX for weeks. The rocket company started to veer off course with a report out on June 22 that, notwithstanding all the hoopla surrounding its IPOβs raising $85 billion in its first trading days, SpaceX wasnβt really flying all that high.
In fact, it was floating a $20 billion bond sale to refinance its debts (mostly from its acquisition of X, on which Musk had put a lofty valuation). The sale seemed to go well initially, but the bonds dropped in the secondary market to a degree rarely seen by investors, driving up their yield premium (or spread) to U.S. Treasurys.
So SpaceX investors are now confronting several big unknowns, including how much cash SpaceX will burn and how much borrowing it will do going forward.
Which means average Americans who hold their savings in index funds are flying blind, even if they donβt yet know it. They may even be lost in space.