Elon Musk's SpaceX listed on the Nasdaq on Wednesday. Starting from an offering price of $135, the stock began trading at $150 and closed the regular session at $161.11, up more than 19%, before reaching around $166 in the aftermarket. With a record-high corporate valuation of $1.75 trillion at its market debut, there had been many concerns that the stock could plunge after listing. For now, however, the first day's performance showed a relatively moderate gain, drawing assessments that it passed the test.
Korean retail investors' interest is hotter than ever. But behind the celebration, a curious dissonance can also be heard. On its first trading day, the stock surged past a market capitalization of $2.1 trillion, overtaking even Taiwan's TSMC and Broadcom to settle comfortably among the world's top six by market cap. On the other hand, no small number of voices are warning of a possible share-price plunge after Monday, asking, "Even so, isn't a loss-making company simply too expensive?"
On top of this, expectations and concerns are squarely at odds, compounded by domestic investors' failure to secure offering allocations through exchange-traded funds (ETFs), the noise surrounding the plunge in existing space-related stocks, and forecasts of widening volatility from single-stock leveraged and inverse ETFs set to flood the market from the 15th.
Let us first look at investors' practical approach. Unfortunately, Korean investors were thoroughly left out of this SpaceX "listing party." Lead underwriter Goldman Sachs allocated not a single share to Mirae Asset Securities, which participated in the underwriting syndicate. As a result, domestic individual and institutional investors enjoyed none of the benefits of the $135 offering price.
Space and aerospace-themed ETF managers and investors, who had sought to load up heavily on SpaceX shares through the offering and reflect the price a day earlier than buying in the open market, are equally in a bind. In Korea, Korea Investment Management's ACE US Space Tech Active ETF participated in the offering but was not allocated shares, and like other ETFs ended up acquiring SpaceX through open-market purchases. Having no choice but to add the stock at a market price more expensive than the offering price, it can no longer fully enjoy the returns. Accordingly, all domestic ETFs holding SpaceX will not be able to reflect the price until the morning of the 16th, so if SpaceX plunges during the trading session on the 15th, investors could be exposed to losses.
Those who have invested directly in the SpaceX stock itself, or who are planning to do so, are also likely deeply troubled. That is because it is far from easy to gauge whether the current price in the $160 range is a bottom, or whether profit-taking sell orders will soon pour out. There is bound to be significant anxiety about getting stuck at the peak, where the listing premium is fully priced in. Looking into the company's fundamentals to predict the stock's direction only deepens the dilemma.
Looking coldly at the numbers alone, SpaceX's current share price cannot be explained by traditional valuation. That is because it is a "loss-making company" with revenue of $18.7 billion and still a $4.9 billion loss. The fact that it has surpassed TSMC—a profitable company with annual revenue exceeding $120 billion—in market cap lends weight to the interpretation that the current price is the result of a premium on the "future vision" of Starlink and artificial intelligence (AI), as well as short-term supply-and-demand dynamics created by an extremely small free float of just 3 to 4% of total shares.
Another worry is that past mega-IPO companies such as Meta (Facebook), ARM, and Reddit all experienced fierce "growing pains" immediately after listing, without exception. Typically, retail buying floods in within one to two weeks, marking a short-term peak, followed by a painful price-correction period over the next several months. Even if SpaceX's long-term upside potential is certain, it is highly likely to go through the rite of passage of sharp short-term price swings.
The fact that 2x leveraged and inverse ETFs on SpaceX will flood the U.S. market starting on the 15th is also a factor that will amplify volatility. With speculative money rushing in right after listing, there is a very high chance of extreme surges and plunges even within a single day. Unlike in Korea, the U.S. stock market does not even have price limit ceilings or floors. Investing carelessly could mean waking up in the morning to find a brutally melted-down account. There is also a major risk of "volatility decay (negative compounding)," in which an account erodes even when the stock price merely moves sideways up and down. Products from smaller asset managers carry the risk of being unable to sell at the desired price due to a lack of trading volume.
For now, it does not appear to be the time to go "all in" on SpaceX driven by "FOMO (fear of missing out)." We urge you to take a long-term view, watching to see whether SpaceX proves its market cap with earnings after the initial supply-and-demand frenzy subsides. Remember that Meta, mentioned earlier, also saw its share price halve and plunge right after listing, but a year later proved its value with earnings and entered a full-fledged upswing.
