SpaceX IPO poses severe market liquidity risks
The guest argued that the massive scale of the upcoming SpaceX IPO could create a significant liquidity drain and face a major demand shortfall.
The argument
Rupert Mitchell calculated that the $86 billion day-one supply requires unprecedented retail participation of 30% and massive warehousing by hedge funds before passive index funds can buy. He estimated a 15% to 20% chance of this causing broader market disruption due to thin top-of-book liquidity.
The thesis, stress-tested
✓ What validates it
- ✓SpaceX downsizes the primary capital raise below the targeted $75 billion
- ✓The IPO lockup terms are renegotiated to be more restrictive
- ✓Broad market indices experience downward pressure during the index inclusion window
▸ Risks discussed
- ▸Retail allocation of 30% fails to find sufficient demand
- ▸Hedge funds refuse to warehouse the shares during the transition period to index inclusion
- ▸Inelastic passive flows force selling of other mega-cap tech stocks to fund purchases
Hear it yourself
"How did you get here? Hey, James. See you. Good to see you guys. It's so crazy that you're here because we were gonna talk about some of your research that you've been putting out. What what an unbelievable coincidence. We're so excited to have you. Thank you, Rupert. It's a pleasure. It's a pleasure. Alright. I'll pull my ass out of bed for you guys anytime. Alright. And you and you just happen to be in the neighborhood a k a in Hong Kong. So That's right. It works out perfect. Alright. It works out perfectly. Let's let's get into SpaceX."
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