SpaceX IPO Insights: Three Key Takeaways for Investors Ahead of AI Giants’ Public Offerings

Key Points

The din surrounding the SpaceX (NASDAQ: SPCX) initial public offering (IPO) was deafening. In the weeks leading up to the IPO, it seemed like investors had nothing else to talk about, despite ongoing geopolitical conflicts, rising inflation, and belt-tightening consumers. Now that the IPO is over, Wall Street has quickly moved on to other topics. That’s not shocking, but it is still worth considering these three takeaways from the SpaceX IPO.

1. Stories beat profits, for now

One of the most notable aspects of the SpaceX IPO is that the company is losing money. Sure, Starlink is profitable, but that business subsidizes the company’s investments in space and AI. What investors really bought was the hope that the company would someday be profitable, assuming Elon Musk’s vision plays out as planned. To be fair, Musk’s vision is alluring, but turning it into reality is still a long way off.

Image source: Getty Images.

Stories are always strong motivators for investors. And, at least for now, it looks like a good story is enough to get a company’s IPO over the finish line. That’s positive news, because next up are Anthropic and OpenAI. They are really just start-up businesses in a new technology niche that requires huge capital investment to compete. The story is good, but the profits, well, they are expected further down the line.

2. Wall Street had no problem with the size of the deal

SpaceX was the largest IPO in history, raising $75 billion. The market didn’t skip a beat, absorbing the deal in stride. Again, that’s good news, since Anthropic and OpenAI are also likely to push the bounds on size when they hold their IPOs. Assuming the AI boom doesn’t end before they come to market, there’s no reason to think that Wall Street can’t handle additional big IPOs.

3. Buying IPOs after the IPO isn’t a sure-fire win

Investors dreaming of easy gains is one of the big reasons why the SpaceX IPO was so well received. The dream of quick riches is why the upcoming artificial intelligence IPOs are likely to do well, too. However, based on the volume-weighted average price, anyone who bought SpaceX after it began trading is unlikely to be making much money, CNBC reports. That could clearly change over time, but the dream of swift profits doesn’t always pan out as hoped with IPOs. Anthropic and OpenAI are unlikely to be much different on this front.

You don’t have to participate

Animal spirits are running high, which helped to make the giant SpaceX IPO a success. Anthropic and OpenAI are likely to be well-received, too. But, sometimes, it pays to wait a little while before buying what amounts to a money-losing start-up when it goes public. That’s true even if Wall Street thinks the stock will go to the moon. And if you do buy a company like SpaceX after its IPO, you should probably think long term, because quick riches aren’t as easy to find as you may think.

Source link