SpaceX has become the hottest story in global investing, soaring to a valuation above $2 trillion and captivating markets worldwide. But is it a revolutionary business success or a masterclass in financial engineering? In this candid interview, Cy Jacobs argues that Elon Musk has cracked the code of modern market structure, using limited share supply, passive index demand and options trading to fuel extraordinary valuations. Jacobs explains why he remains sceptical of the fundamentals, yet still believes betting against SpaceX could be a costly mistake.
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Edited transcript of the interview
00:00:05:06 – 00:00:23:07
Alec Hogg:
The whole investment world is caught up in the SpaceX frenzy. The shares came to the market as a well over $1 trillion listing and are now over $2 trillion. But how much of it is hype, and how much of it should we be taking credit for as South Africans? Because there is a South African who’s put it all together.
00:00:23:12 – 00:00:29:06
Alec Hogg:
Cy Jacobs will be giving us his insights in a moment.
00:00:29:08 – 00:00:48:04
Alec Hogg:
Well, Cy, you have been saying that Tesla is the short – in other words, the stock one should not be investing in and one that you should be selling. It’s been bouncing all over the place. But is that a Tesla thing or an Elon Musk thing, or does it translate through to SpaceX? Where are we in all of this?
00:00:48:06 – 00:01:14:19
Cy Jacobs:
Right. So what I’ve worked out – good morning, Alec – what I’ve worked out over time is it’s not necessarily that these companies are a short. It’s the fact that Elon Musk has absolutely mastered and cracked the code of the market structure: how to IPO these things, how to create a small free float, how to control that free float via options, via passive index buying, via understanding exactly what makes up that float.
00:01:14:21 – 00:01:49:15
Cy Jacobs:
And over time, the fundamentals of a business are not actually following through to the valuation in these two particular share prices.
I mean, SpaceX – I’ve always believed Tesla was a phenomenal business. Elon Musk is a genius of an individual. But that business, over the last few years, has deteriorated substantially in cash flow, in operating margins, gross margins, the number of vehicles sold.
00:01:49:17 – 00:02:09:08
Cy Jacobs:
Every metric you look at in the delivery of full self-driving, which hasn’t materialised, where others are ahead of him – and all of this has culminated in the share price actually going up over time.
Yes, it has stalled a little bit because there is quite a reasonable amount of float and it’s hard to control everything.
00:02:09:10 – 00:02:42:12
Cy Jacobs:
And the news has been so dire that the stock has failed to reach new highs over the last few months, but it is still $1.4 trillion for a company that is hardly making any money.
And now comes along his next investment, SpaceX, which, if you look at it, makes $19 billion of annual sales and gets a $2 trillion valuation, becoming the fifth-largest company in the world off the IPO.
00:02:42:14 – 00:03:11:01
Cy Jacobs:
And this is a result of market structure where you only list 4.3% of the equity, and you make rules around that 4.3% of the equity.
Everybody’s tied up, including him – he’s tied up for one year. The balance of all the investors that have funded all the various rounds for 15 or 20 years are tied up in total at the moment.
They will get a small amount of release after the first set of results at the end of July, beginning of August.
00:03:11:03 – 00:03:43:05
Cy Jacobs:
And then slowly a little bit of stock gets added to the market. But this is particularly well thought out and structured because, as those amounts become listed or moved to the market, so the passive index buying continues.
One of the big things, for example, that Elon Musk did prior to this listing is he convinced Nasdaq, which normally has a full one-year trading history to make it into that index, to allow a 15-day fast inclusion period if he were to come to market.
00:03:43:06 – 00:04:14:11
Cy Jacobs:
So what is happening now, after 15 days, SpaceX will have inclusion in the Nasdaq and it will be one of the largest companies – maybe even the largest by the 15th day. Who knows?
And he convinced them that the free float multiplier, which obviously gets down-weighted because SpaceX only listed less than 5% of its equity, that free float must be multiplied by three in the calculation to work out what goes into the index.
00:04:14:13 – 00:04:51:22
Cy Jacobs:
So we’ve got a situation where, in my opinion – and I’ve been reading about the Tesla market structure for ages, and I studied exactly what makes up the SpaceX structure – this is really not about fundamentals of the business.
You can promise whatever you want. Those promises haven’t materialised over the years, both at Tesla and SpaceX.
But this one is actually just amplifying the ridiculousness of a listing. I mean, that’s what it is.
00:04:52:00 – 00:05:10:21
Alec Hogg:
But, and many people in South Africa know you and deeply respect you on this, why aren’t the Americans clicking to this?
It sounds to me a little bit like what we had in this country with Tigon, with Gary Porritt, and a tiny, tiny free float. And of course, that all ended in tears – in a lot of tears.
Are we seeing a repeat here?
00:05:13:15 – 00:05:34:04
Cy Jacobs:
I think the difference with Gary Porritt and Tigon is that the numbers were fraudulent. So this is not a fraud. The business exists. The business has exciting one-off opportunities that nobody else has.
But does that materialise into profit? Not necessarily. It hasn’t in the past. Yes, they have one very good business, Starlink.
00:05:34:04 – 00:06:02:18
Cy Jacobs:
But if you had to value Starlink, and even give it the most absurd multiple, you wouldn’t get to probably 20% or 30% of SpaceX’s value.
Then you’ve got this whole xAI Grok, which was the roll-up of all the data businesses and AI, together with the old Twitter, which is X, which was really, really struggling, but got rolled into SpaceX just before the listing at almost a quarter of a trillion dollars.
00:06:02:20 – 00:06:25:06
Cy Jacobs:
And you add that as well to the rocket launch business, which is exciting and fun, and has contracts with government and contracts with corporates, etc.
But it’s never made money. It’s very expensive. Rocket fires go wrong, etc.
Is that a business you really want to invest in for return?
00:06:25:06 – 00:06:47:16
Cy Jacobs:
So this is three big businesses together.
The only thing I would say to you is, would I short it? Definitely not, because the market structure doesn’t allow it.
In fact, this could go just like SpaceX rockets – this could go to the moon, because options, for example, started trading yesterday for the first time on SpaceX.
00:06:47:18 – 00:07:19:11
Cy Jacobs:
The volume was so big that 60% of the IPO stock traded again yesterday in the market, which is crazy.
I’ll give you some interesting things as well. All the various disciplines for this listing were put in place beforehand so intelligently.
For example, if you were a client at Fidelity, Robinhood, SoFi or E-Trade, you were actually warned that if you flipped the stock, you would not get any other further IPOs.
00:07:19:11 – 00:07:37:09
Cy Jacobs:
And we know we’ve got some great IPOs like Anthropic and OpenAI that may be knocking on the door.
So you were actually warned that if you were given stock, you were not, in fact, allowed to sell it, which I find fascinating.
00:07:37:11 – 00:08:02:15
Cy Jacobs:
And this is the largest IPO that’s ever happened in the history of the market, but at the same time the tiniest float that’s ever happened.
So I’m not sure how this was, to be honest, allowed to happen.
Why is America not stopping it? Because everybody’s incentivised by it.
There have been multiple, multiple raisings of equity over the years, and nobody’s really lost out yet.
00:08:02:15 – 00:08:26:13
Cy Jacobs:
This is money created out of nothing.
If you can sell some of your shares at a $2.3 trillion or $2.4 trillion valuation, this is a get-rich scheme that obviously is mostly going to Musk, but is also going to a lot of corporate America, a lot of very high-net-worth individuals who are very connected in the private equity and pre-IPO space.
And it’s a get-rich scheme.
00:08:26:15 – 00:08:40:09
Cy Jacobs:
And, you know, a lot of retail jumped on board on the IPO on the day of the listing.
But really, that’s just because of the hype, and that’s a very small component of who owns SpaceX.
00:08:40:11 – 00:09:00:00
Alec Hogg:
I was looking at some of the valuations over the last 24 hours and thinking back. It’s not that long ago that we had our very first $1 trillion company.
Now we’ve got a whole host of them – multiple trillion-dollar companies.
What’s going on here, Cy, and how is it all going to end?
00:09:00:02 – 00:09:26:06
Cy Jacobs:
Well, I think the one big issue that the world never really anticipated – and it’s maybe good because it’s made a lot of investors in the world rather wealthy over time – is the construct of active versus passive.
In other words, passive being those who track the various indices, and then more and more of those being listed every single day.
You’ve got Vanguard, for example, running $12 trillion.
00:09:26:06 – 00:09:50:08
Cy Jacobs:
There’s continual money being fed into the passive indices, and those have to buy the top stocks.
So today, when you look across these companies that are worth $1 trillion to $3 trillion, besides SpaceX, the others are mostly held by passive ETFs.
Those are the big shareholders.
00:09:50:08 – 00:10:00:00
Cy Jacobs:
And those continue to buy.
So, you know, are they really in touch with reality? Is someone looking at the underlying fundamentals and saying, “Well, you know what, that’s not Microsoft today. We think that the numbers might be disappointing”?
No, it’s based on size and based on the flow that keeps going into these passive ETFs.
00:10:00:00 – 00:10:43:23
Cy Jacobs:
So the market construct has changed materially. It’s really, to be honest, not that much to do with active valuations, particularly in America, in these top companies.
So I’ll give you a prime example now. I just took some notes before.
Microsoft and SpaceX are of similar size today in market cap. Microsoft has sales of $318 billion – revenue, $318 billion. SpaceX, $19 billion.
So, I mean, these companies – in fact, SpaceX doesn’t make it into the top 600 companies in the world, even from a revenue perspective, never mind a profit perspective, because it actually makes losses.
00:10:43:23 – 00:11:16:02
Cy Jacobs:
Microsoft makes approximately $125 billion a year in profit. SpaceX makes none.
So why would these two companies be valued the same?
People will say, “Oh well, AI is taking away Microsoft,” and we’re not about to lose Microsoft. I mean, they’re all saying the AI world.
But SpaceX – the valuation of SpaceX is not being determined by what is going to come. It’s being determined by a simple thing: market structure.
00:11:33:03 – 00:11:47:17
Alec Hogg:
Keep the shares – keep very few of the shares – available to the public. Make sure that they all get terribly excited about it, and then they will overvalue because it’s supply and demand, I guess, from that perspective.
Is it as simple as that?
00:11:47:19 – 00:12:14:22
Cy Jacobs:
Correct. And there’s been another thing where there has been a lot of literature written, and that’s around options – shorter-dated options, call options.
On the first day of trading options for SpaceX yesterday, the options market set a record for the amount of options traded post-IPO.
The previous record was when Facebook listed. The record was absolutely smashed yesterday.
00:12:15:00 – 00:12:39:23
Cy Jacobs:
And the options were basically two-to-one call options to put options. In other words, they were bullish options.
Bearish options, bear in mind, doesn’t mean you’re necessarily going short. You could, for example, just be capping your upside as well.
So a lot of people that bought SpaceX shares in the IPO would sell options against it at higher prices.
00:12:40:01 – 00:13:01:06
Cy Jacobs:
Because the volatility of these options – the volatility of SpaceX was so high – that you could get a lot of income out of selling options in SpaceX.
But, I mean, we’ve seen call options in size trade as high as $335. There were some call options bought on the first day of option trading.
00:13:01:06 – 00:13:46:12
Cy Jacobs:
And these are short-dated options that are going to expire at the end of this week and the end of next week.
So what happens when the underlying option writer effectively allows you to buy that option? They have an element of SpaceX shares they need to buy to hedge themselves in case the share were to reach $335.
And if that share starts to creep, they have to keep buying more shares to ensure they’re not out of pocket at the time SpaceX reaches $335 and maybe goes higher.
00:13:46:14 – 00:14:12:13
Cy Jacobs:
So a lot of this – the market structure is determined by the free float, by the options, by the amount of passive buying and how much is actually available.
I really believe Elon almost mastered this fully with Tesla.
He understood how this worked and saw the demand from options, saw how much the float was controlled, and realised: “Now I can bring the super one to the market. Now I can bring the one and structure it perfectly so that this won’t fall dramatically.”
00:14:12:15 – 00:14:44:06
Cy Jacobs:
And the big thing about having this company not fall is he can now use that scrip, obviously at the ridiculously inflated prices, to buy other businesses – maybe even Tesla.
The market’s saying, “Well, Tesla’s a bit in trouble – selling less cars, FSD’s not working. He’s just spinning more and more stories, talking about trillion-dollar robot opportunities where those robots are really far behind.”
00:14:44:08 – 00:15:08:08
Cy Jacobs:
So maybe the opportunity now is to try to get them into one business.
Then you’ve got this monolithic biggest business in the world from a market cap point of view. It probably won’t really wash its face. Net-net, it probably doesn’t make money with the two of them together.
But then he has the opportunity of issuing equity to slowly buy businesses that are actually good businesses – profitable businesses.
So it could become self-fulfilling in time.
00:15:08:10 – 00:15:17:12
Cy Jacobs:
So that’s where we stand. To me, the market’s broken when it comes to looking at these two businesses, but would I short them? No.
00:15:17:13 – 00:15:28:12
Alec Hogg:
But he’s already done his first transaction – a 60 billion rand purchase of a startup. So it appears as though your thinking has already been confirmed.
00:15:28:14 – 00:15:59:11
Cy Jacobs:
Yeah, I think that’s starting. Look, you’ve got to give him credit. People made a fortune of money in Tesla. If you made the money, you are a believer.
You’ve seen that, regardless of it not materialising into growing profits and growing margins, the share price hasn’t been smashed.
So you keep believing that this is the way. He is the god of the market, and you need to be on his side.
00:15:59:11 – 00:16:14:06
Cy Jacobs:
And that’s proven to be correct over time.
So, you know, who am I to say you mustn’t go with it?
All I’m saying is it’s really just not based on the underlying profitability of these businesses.
00:16:14:08 – 00:16:16:01
Alec Hogg:
So what could go wrong?
00:16:16:03 – 00:16:37:17
Cy Jacobs:
I think you could get a couple of things.
Regulators could wake up and say, “You know, we’ve been duped here. We never realised what had happened. We gave a fast track into Nasdaq and we allowed the free float to be multiplied.”
Interestingly enough, the S&P said to Musk, “We’re not accepting you make losses and we’re going to wait a full year.”
00:16:37:18 – 00:17:22:13
Cy Jacobs:
So at least it never went into that index.
It also is going into the MSCI, CRSP and the FTSE Russell.
And those four combined, including Nasdaq alone, are about 30% to 40% of the amount of the IPO stock that was listed.
So that’s one component besides the options, besides the retail frenzy.
You could get in a situation – I don’t think it will happen – but maybe regulators wake up and say we might have to reverse this, or force some selling from some of the locked-up investors to make the market more real, or more indicative of a true market with buyers and where there are enough sellers to satisfy the demand.
00:17:22:13 – 00:17:37:17
Cy Jacobs:
Or it continuously goes up and eventually Elon can buy up anything he wants, and we have one very, very large company in the world.
00:17:37:19 – 00:17:57:06
Cy Jacobs:
I think also, if you look at some of the steps, it’s so genius – some of the steps that were taken pre-listing.
For example, if you had brokers that were negative on Tesla, JP Morgan had an analyst who had a very low valuation on Tesla. He saw it going backwards.
00:17:57:08 – 00:18:24:13
Cy Jacobs:
Interestingly enough, just a couple of weeks before the SpaceX listing, that analyst was removed. A new analyst was put on the job, the target price increased way above the spot price.
And then JP Morgan included, obviously, as one of the SpaceX investment underwriters – fee earners and the ability to make money out of SpaceX.
Because if you’re in the investment banking world, you don’t want to miss out on the biggest IPO in history.
00:18:24:15 – 00:18:46:12
Cy Jacobs:
The fees were enormous. I think, if you look at them, it’s like half a billion just in the documentation and corporate finance fees.
And then there was the ability to get control of what’s called the green shoe – the additional almost 1% of equity that was given to all these investment banks to help them control the pool.
00:18:46:14 – 00:19:09:00
Cy Jacobs:
And they were very smart too. They knew that once this thing was listed, there was not enough free float.
So they’ve been able to leak that out over the first few days, and probably just because of them, the share price hasn’t gone up to even higher than where it is now, because they’re obviously filtering it down and they’re trying to make it look as normal as possible.
00:19:09:02 – 00:19:14:18
Cy Jacobs:
Given the amount of stock they’ve got and the amount of profit that they’re making out of this IPO.
00:19:14:20 – 00:19:37:12
Alec Hogg:
It reminds me of the dot-com boom, and I was right in the middle of that.
I had a company which was tiny – five or six people – but everybody wanted something to do with the internet.
We had our listing done for free on the basis that we would give the investment bank some shares to place, and they could do the same thing.
00:19:37:12 – 00:20:04:05
Alec Hogg:
And of course, the share price, although it was already very high to begin with, doubled on the first day of listing.
And that was right towards the end of the boom.
So it sounds to me like we, as outsiders – and you’re not, and you’re really sharing some fascinating insights for us – but for most people, they look at this and they get caught up in the numbers, whereas there’s a big game going on here that they don’t understand.
00:20:04:07 – 00:20:25:00
Cy Jacobs:
Well, I agree. I think, for you, I mean, I even saw an article this morning put out that EasyEquities had their biggest one-day ever because, after the IPO, they weren’t obviously given IPO stock. But after the IPO happened, EasyEquities’ South African clients bought over 100 million rands’ worth of SpaceX shares.
The previous highest number was 60 million in the Boxer listing.
00:20:25:02 – 00:20:51:18
Cy Jacobs:
So the frenzy is definitely there.
Retail clients who have got really little understanding of balance sheets, the ability of businesses to make money, but rather follow the hype and the media and the speculation that’s built up by Elon and his team in the media.
I mean, once you control X, the previous Twitter, you almost control what happens with the media – how the media sees SpaceX.
00:20:51:18 – 00:21:26:07
Cy Jacobs:
There was a brilliant article, which I can send to you independently, which is actually on Substack – an account called Quote the Raven – where it was posted on X, and it actually went into all the detail about this, about the free float and about how manipulative that is and how much they’ve been doing work on Tesla options.
Well, what do you know? When you clicked on that article a couple of hours later, it was gone.
So it’s interesting to understand what has happened here and what will happen.
00:21:26:09 – 00:21:46:07
Cy Jacobs:
Look, all I would say is you want to be on the right side of history, you probably want to stay long for now based on market structure and demand – not based on fundamentals or the outlook of SpaceX.
00:21:46:09 – 00:22:01:10
Alec Hogg:
But if Elon can do this, surely others will learn from his example.
00:22:01:12 – 00:22:27:14
Cy Jacobs:
So I’ve thought about that as well.
And we’ve got two other potential listings coming now, which is Anthropic, which is a business growing at an immensely fast pace.
It’s probably just broken profitability now, but probably will be pretty profitable over the next couple of years.
And they’re already saying it’s worth probably $800 billion.
00:22:27:16 – 00:22:38:22
Cy Jacobs:
I’m sure people will learn from this, but I’m sure regulators will also learn from this.
So let’s see. I think let’s see what’s happening, what will happen. I don’t know.
00:22:39:00 – 00:22:55:09
Alec Hogg:
So what should we, the people, do? What should the business tribe do?
There are lots of them who, like Magnus Heystek, got themselves a stake in SpaceX by acting ahead of the time.
And there are, I’m sure, many of them who bought on day one amongst those EasyEquities clients.
00:22:55:11 – 00:23:17:13
Cy Jacobs:
Look, many, many of the investment world here in South Africa, top asset managers globally – everyone all have stakes in SpaceX.
I mean, you know, it was offered to us many, many times over the years.
Unfortunately, you can’t buy it for your public funds because there was no listed price. You can’t account for it. It’s unfortunate.
00:23:17:15 – 00:23:49:12
Cy Jacobs:
But many, many people have got stakes in this.
And as a result, everyone wants it to do well.
And that’s the crazy thing about this: you don’t really care about what’s happening.
This has been manufactured, and you just – your first exit.
There’s approximately, I think it’s about 12% of the 52% that’s – no, of the 40%, I think it’s like 15% or something extra.
00:23:49:12 – 00:24:12:07
Cy Jacobs:
An extra 6% or 7% will come on August – or July, the end of July – just after the earnings release.
And that is 20% of all the people, excluding Musk – excluding employees – that have taken prior rounds over the last 20 years.
So there is an additional, I think it’s going to be 5.8% of the entire company.
00:24:12:09 – 00:24:34:11
Cy Jacobs:
So basically doubling the free float that’s coming late July.
Not that everybody will sell that stock, because you have a lot of long-term investors there.
For example, Google will be in that, and I don’t think Google will sell.
I mean, Google has just done a deal – I’m not sure if you’ve seen it – where they need some of the compute that the Grok business has.
00:24:34:13 – 00:25:01:08
Cy Jacobs:
So effectively, they’ve done a short-term deal where SpaceX’s data availability – the compute is so large and they’re actually not using it all; it’s unutilised.
So there’s almost like a rental agreement between Google and xAI for that capacity.
So I don’t see Google, on the other hand, selling their SpaceX that made like $100 billion – I don’t know what the number is – out of this listing.
00:25:01:08 – 00:25:27:10
Cy Jacobs
100 billion USD out of this listing. So there are a lot of companies and corporates and funds and ETFs and whatnot that will not sell when that first lock-up comes, but some will sell. But overall, I still see the market dynamic as very bullish. It hasn’t gone into the Nasdaq yet. There’s going to be massive demand when that happens in the next 12 days or so.
00:25:27:12 – 00:25:48:08
Cy Jacobs
So I think what you do is, if you’re a holder, you hang on. Be careful to go short because I think that would be foolish. And if you’re a Tesla shareholder, I think you might get bailed out at some stage soon by a takeover of Tesla by SpaceX. That’s my gut feeling.
00:25:48:10 – 00:26:01:20
Alec Hogg
So although, and the way that you’ve unpacked it for us, it feels a bit like a Ponzi scheme. Just don’t jump off. Don’t jump off yet, because there’s a heck of a lot more in.
00:25:01:22 – 00:26:24:11
Cy Jacobs
I’ve kind of always said that, you know, where I’ve been wrong is the fact that there’s just not enough liquidity in Tesla, for example, to bring it down. And I really don’t believe there’s enough liquidity in SpaceX, you know, that’s for sure. I mean, you’ve got Musk alone holding almost half the equity.
00:26:24:13 – 00:26:43:12
Cy Jacobs
You know, I think that’s where he’s at – I think 800 to 900 billion at current levels, just in SpaceX. It dwarfs what he’s holding in Tesla. I mean, Tesla has become insignificant to him in value relative to the size of his SpaceX holding. Not that he can sell it, but on paper.
00:26:43:14 – 00:27:04:02
Alec Hogg
But it’s got to affect him as a human being, this kind of thing. And we know he’s been saying strange things about South Africa on the one hand, and you almost feel, as a South African, as a guy who grew up in Pretoria, he could be such a big asset for us. But wow, all of this, it’s hard to see how it’s going to work out.
00:27:04:02 – 00:27:10:13
Alec Hogg
And again, it’s not hard to see why some in Pretoria don’t want to have anything to do with him.
00:27:10:15 – 00:27:36:01
Cy Jacobs
But it’s actually just hard to believe that the first trillion-dollar dollars comes out of Pretoria, in what I’ve met in itself is a crazy thought. But yeah, I think people are a little bit disappointed in particularly how much he’s given back to his country of origin. He’s got mixed feelings about South Africa.
00:27:36:03 – 00:27:58:01
Cy Jacobs
You know, but he is in a position where he really could change a lot of the world with that kind of money. Not that that money is necessarily can be realised. You know, it’s due to market structure, as I’ve said. So who’s to know what SpaceX is really worth in the free market?
00:27:58:03 – 00:28:10:10
Alec Hogg
But it’s got to worry you that if he can crack the code, others are going to relearn. And you say the market is broken in these two stocks; it could be broken in many more.
00:28:10:12 – 00:28:44:01
Cy Jacobs
Absolutely. And that’s why I think regulators need to sit up and listen and work this out and see, you know, particularly understand what’s happening around the options market and understand the effect of passive. You can limit passive; it’s getting bigger and bigger. And it’s difficult to argue against passive.
00:28:44:01 – 00:29:11:16
Cy Jacobs
You know, today, if you ask me, would I ever invest in an active manager in America long only? Never. Not the best ones there. Because over time, I think it’s whatever the percentage is, in the last ten years, 98% of active managers have been beaten by the passive indices.
00:29:11:16 – 00:29:38:11
Cy Jacobs
So you’ve got no, in my view, no ability to outperform. It’s very different in emerging markets. And luckily it’s very different in South Africa.
00:29:38:13 – 00:30:16:07
Cy Jacobs
You know, we don’t have that amount of passive making up our market, number one. And number two, the dynamics in our market are just very, very different. We’re not driven by option flow. Options are very small in our market. Stocks aren’t manipulated by the option flow.
00:30:16:09 – 00:30:22:10
Cy Jacobs
But it doesn’t – nothing goes up indefinitely forever. And that’s got to be.
00:30:22:12 – 00:30:52:21
Alec Hogg
All that can bring this down is exactly that: the release of extra equity by locked-up shareholders.
00:30:52:21 – 00:31:28:11
Cy Jacobs
So the shareholders, excluding Musk and employees – Musk and employees are locked in for 365 days, a full year. So obviously that’s a big event in a year’s time from the IPO. The balance of all these locked-up investors, who were early investors in SpaceX over the last couple of decades, those investors are staggered from the first set of results in late July, which is about 20% of their equity, all the way to 180 days off the IPO.
00:31:28:11 – 00:31:57:12
Cy Jacobs
The balance of those locked-up investors effectively could be released. And there’s conditions, interestingly enough, about the release of parts two, three and four of that. It depends on how the share price has performed, whether you can unlock additional stock.
00:31:57:14 – 00:32:40:05
Cy Jacobs
Now, I’ve never seen that before either. So that’s another new clever trick that’s being brought in on this IPO that we haven’t seen before, that shareholders aren’t necessarily going to have all this stock unlocked. It all depends on certain parameters. It all depends on how the share has done.
00:32:40:05 – 00:33:05:15
Cy Jacobs
So that’s something that makes this almost a laughable exercise. But at the same time, it’s not like someone has been aggrieved by this. You know, obviously, if you can short an IPO based on fundamental valuation, well yes, you would. You’d be hurting right now. But besides that, it’s almost a wealth creation of it.
00:33:05:17 – 00:33:14:22
Cy Jacobs
It’s only when you actually bank the money that the wealth is really yours. And I guess that’s one thing that old shareholders should be looking at.
00:33:15:00 – 00:33:25:04
Alec Hogg
If you were a member of the public looking at the way you’ve unpacked it for us, would you be buying shares in SpaceX?
00:33:25:06 – 00:33:47:18
Cy Jacobs
I probably would. I mean, I don’t like to give recommendations, as you know, because what I say today could change tomorrow. I mean, bear in mind, we could have SpaceX say something tomorrow. But as I stand right now, I would say the market dynamics are more leading to the stock going up than down, just because options have just started trading.
00:33:47:18 – 00:34:17:02
Cy Jacobs
The passive indices still have to buy. I tracked some interesting stats yesterday on how many ETFs have already bought stock in SpaceX. You know, these are active ETFs, not even the passive ones. So I think there were 50 or 40 that have been buying equity already. And I think that’s very interesting because it is number five in the world and probably going to be higher.
00:34:17:04 – 00:34:35:14
Cy Jacobs
You have to have some kind of equity stake in it. So I think the forced buying remains. But all I can caution people is: don’t buy this on some kind of valuation basis or because you expect to get a dividend out of this. You’ll never see a dividend as long as you live on SpaceX, in my view.
00:34:35:14 – 00:35:06:05
Cy Jacobs
So it’s a crazy thing. And things get to regulation. America’s actually falling apart to an extent because you can’t make forecasts about your own business without making it publicly in the correct form, with the correct forms, etc.
00:35:06:05 – 00:35:29:05
Cy Jacobs
Elon went on, you know, the day before the listing and said – he just posted on X – that he thinks SpaceX’s revenue will be $1 trillion by 2030. So we’ll remember that number. I mean, the only way he gets to $1 trillion is by buying everything else that’s going to, and using SpaceX equity to fund it, to add all those businesses up.
00:35:29:07 – 00:35:55:18
Alec Hogg
Cy Jacobs is the co-founder of 361. As always, we thank you for your forthright opinions and definitely for unpacking something that many members of the public have got no clue about what’s really happening. So now we go to sneak behind the curtain. I’m Alec Hogg from Biznews.com.
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