Elon Musk' SpaceX has made its historic debut, but trader and podcaster Ed Elson is cautious on it and other colossal IPOs slated for this year.
The host of the popular Prof G Markets podcast with Scott Galloway, Elson often writes about his own trading strategies. He recently laid out a detailed cast for why he isn't optimistic about the wave of hot tech IPOs that are poised to flood Wall Street in the coming months.
"SpaceX, Anthropic, OpenAI, and Google are about to inject roughly $350 billion of new equity into the market," he wrote in a Substack post ahead of the SpaceX offering. "That's more money than the entire US venture capital industry invested last year, and more than was raised in IPOs over the past seven years combined. And that's just four companies."
Google falls into Elson's thesis because of its recently announced plan to raise $85 billion through the sale of new stock. His bearish take on SpaceX and the broader mega-IPO cycle centers around the argument that the market is on the verge of a supply shock that will negatively impact the overall market by compromising other stocks, primarily incumbent tech winners.
"The question is whether stock prices (tech, in particular) can remain this high with this much new supply," Elson noted. "I doubt it. Another way to think about it is the following: If investors want to fund $350 billion in new stock purchases, what will they have to sell?"
This is in stark contrast to Elson's previous take on these companies. Almost a year ago, he spoke more positively about SpaceX and OpenAI, highlighting that he wanted his fellow Gen Zers to have the same ability to invest early in generation-defining tech companies as their parents.
Now, Elson says SpaceX isn't a good investment, regardless of the hype. Shares this week saw their first slide since the IPO, with the stock dropping 10% on Thursday.
"Compared to previous go-publics, SpaceX's valuation falls nothing short of insane," he wrote. "Meta went public at 28 times sales with 88% revenue growth. Google went public at 10 times sales with 234% growth. Put another way, SpaceX is growing seven times slower while asking for a multiple ten times higher."
More broadly, he sees a larger problem that pertains to other offerings in the works from AI titans Anthropic and OpenAI, which is that they're rushing to IPO because their valuations have peaked and are looking to cash out while AI mania is still kicking.
"Sam Altman's trillion-dollar question isn't whether he can achieve AGI, but whether he can sell OpenAI stock at the highest possible price," Elson added. "He has finally found his moment to sell, and that moment is now."
