Mercury, Venus and Jupiter aligned in the second week of June and, for a moment almost as fleeting, Elon Musk became the world\u2019s first trillionaire. The United States tech entrepreneur had reportedly targeted this celestial configuration to launch the biggest initial public offering (IPO) in history \u2013 US$75 billion of shares in SpaceX, a\u00a0company that promises to \u201cbuild the systems and technologies necessary to make life multiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars\u201d.<\/p>\n
After their float at US$135 apiece, the shares traced a grand arc: soaring to an early peak of $225, which brought the company valuation above $2.6 trillion, before swooping to $120. By last weekend, two aborted rocket launches had helped to wipe $1 trillion from the company\u2019s market value.<\/p>\n
A resurgence is possible \u2013 few market prices are as volatile as those of today\u2019s US tech stocks \u2013 but there\u2019s no shortage of analysts who see Musk\u2019s latest venture as further evidence of a dangerously inflated sector. Much of it can\u2019t hope to turn a profit in the next five to 10 years and is vulnerable to interest rate hikes driving up the cost of borrowing. The AI universe in particular appears sustained by overweening ambition, undeliverable promises, political cronyism and a lack of apparent competition.<\/p>\n
Meanwhile, investors around the world are increasingly pulled into the orbit of these giants weighing into major sharemarket indexes. There is more to come, too \u2013 AI behemoths Anthropic and OpenAI are reportedly preparing their first public offerings, and SpaceX, on its wild course, has beaten a path to the Australian market.<\/p>\n
Months ago, Musk\u2019s company secured the blessing of the Australian Securities and Investments Commission to give buyers here direct access for the first time to a big-ticket US listing at its launch. The claims in the\u00a0
279-page US prospectus \u2013 somewhat tempered in the ASIC-approved and image-free Australian version \u2013 were so grandiose as to be beyond meaning. Speaking of its theoretical maximum revenue, SpaceX claimed to have \u201cidentified the largest actionable total addressable market in human history\u201d, at $28.5 trillion.<\/p>\n
On his Pivot podcast with tech journalist Kara Swisher this month, New York University\u2019s Stern School of Business academic Scott Galloway described the launch as the \u201cgreatest transfer of wealth from retail investors since crypto\u201d.<\/p>\n
Super industry peak body the Association of Superannuation Funds of Australia estimates that every Australian now has about $50 of exposure to SpaceX. That\u2019s likely to grow as more of the company\u2019s privately held shares are unlocked.<\/p>\n
Macquarie Capital underwrote the offer in Australia and, as the hype surrounding the IPO built, CommSec, the investing arm of Commonwealth Bank, was also contacted with an offer of direct purchases for retail investors \u2013 as distinct from professional or high-net-worth buyers. \u201cWe had the ability to email 10 per cent of Australians to let them know,\u201d managing director James Fowle told The Australian Financial Review at the start of this month. That led to 37,000 new international accounts for CommSec, more than 28,000 applications \u2013 and about $1\u00a0billion for SpaceX.<\/p>\n
In an earlier interview, Fowle told the AFR that CommSec was \u201ckeen to play a greater role connecting customers with listings from around the world, especially the US\u201d. The executive was on leave this week and could not be reached for comment, but a spokesperson confirmed the broker received \u201crecord levels of interest\u201d from customers.<\/p>\n
Other Australians may be less aware of SpaceX\u2019s role in their personal finances. In the lead-up to the launch, Macquarie Capital reportedly met extensively with superannuation funds to pitch the offering. (Australian Super, Australian Retirement Trust, UniSuper, Aware Super and Hesta declined to comment for this story.) Though their receptiveness is unclear, the Association of Superannuation Funds of Australia estimates that all savers now have about $50 of exposure to SpaceX. That\u2019s because recent rule changes meant the new stock could be fast-tracked into many of the leading indexes tracked by superannuation funds and popular exchange-traded funds. That exposure is likely to grow, too, as more of the company\u2019s privately held shares are unlocked, over increments starting next month, and when the company joins America\u2019s flagship S&P 500 index. The widely tracked benchmark stuck to its eligibility requirements, meaning SpaceX can\u2019t enter for at least a year and must meet a profitability threshold.<\/p>\n
SpaceX isn\u2019t expected to make money for about another decade, though, mainly because the bulk of it is losing vast sums of money. The actual space part of SpaceX \u2013 founded in 2002 and focused on low-cost, reusable rockets \u2013 is only a fraction of the company. There\u2019s also the satellites and communications system known as Starlink, and the AI venture formerly known as xAI \u2013 acquired by SpaceX in February \u2013 which includes the social media platform formerly known as Twitter. In the first three months of this year alone, the space division lost US$662\u00a0million, the AI unit lost almost US$2.5\u00a0billion and the connectivity division made a profit of almost $1.2 billion.<\/p>\n
Aside from massive losses, there\u2019s Musk\u2019s \u201cmove fast and break things\u201d approach to innovation \u2013 his thrill for what he calls \u201crapid unscheduled disassembly\u201d isn\u2019t conducive to a stable market pricing. Then there\u2019s the company\u2019s shocking environmental, social and governance score, which makes it off limits for most ethical and sustainability-focused funds. While the data centres of the AI unit guzzle water and power, and Grok churns out sexualised images of children, Musk controls more than half the company\u2019s votes, can appoint most of the board and can only be fired by himself. The day before the IPO, index provider MSCI assigned SpaceX its lowest Environmental, Social and Governance rating, on a par with\u00a0Russia\u2019s after the invasion of Ukraine.<\/p>\n
These governance concerns are sharpened by reports that Musk is speaking openly within the company about a merger with Tesla. Given SpaceX\u2019s habit of absorbing Musk\u2019s other ventures, some analysts anticipate a move next year, which would allow him to assume control of one of the world\u2019s largest companies, with a gravitational pull for the world\u2019s investment capital. The arrangement will benefit the entrepreneur far more than his investors.<\/p>\n
One investor who is benefiting perhaps more than others is mining magnate Gina Rinehart. A Sky News item featured on the Hancock Prospecting website reports that the company bought a US$1 billion stake in SpaceX, as a gesture of support for industries led by \u201csensible, hard working, patriotic and exceptional people\u201d. The article quotes Hancock Prospecting chief executive Garry Korte saying, \u201cwe also see the possibility of mutually beneficial arrangements between SpaceX and Hancock Prospecting\u2019s significant critical minerals investments, as demand grows for the materials and infrastructure needed to support advanced technology\u201d.<\/p>\n
At the National Bush Summit in Townsville last month, Rinehart suggested Queensland offer \u201csparsely or non-populated islands \u2026 where there aren\u2019t high-end tourist facilities\u201d to Musk \u201cat no cost for his SpaceX satellite construction and launches\u201d.<\/p>\n
Tony Sycamore, a market analyst at IG Australia, told Guardian Australia Rinehart was unlikely to be bothered by the slide in her investment. \u201cYou\u2019re looking to invest in SpaceX for the long term; you\u2019re backing the man,\u201d he said. \u201cShe knows Elon personally.\u201d<\/p>\n
So there\u2019s mutual appreciation between the richest woman in Australia and the richest man in the world, seeking to make themselves still richer. Meanwhile, the superannuation industry estimates about $400 billion in Australian retirement savings \u2013 climbing to $1 trillion by 2035 \u2013 is invested in Wall Street, which is up to its eyeballs in tech investment. And the fortunes of much of that hinge, for now, on Donald Trump.<\/p>\n
The US president is lining his pockets with proceeds from his crypto ventures and refuses to keep his wealth in a blind trust, as others have in the past. Billions of dollars\u2019 worth of government contracts have gone to SpaceX and environmental regulations have been scrapped to enable more rocket launches. For this IPO, market regulators bent the rules to make it possible for Musk to float just 5 per cent, instead of the mandated 10 per cent of the company, in what Kara Swisher and Scott Galloway called \u201cmanufactured scarcity\u201d intended to support the prices.<\/p>\n
Musk has \u201cTrump on his shoulder\u201d, Galloway says: \u201cThat\u2019s what people are buying.\u201d That\u2019s supposedly a positive for all who have bought into Musk\u2019s brilliant and wild adventure. But those with no taste, or balance sheet, for rapid unscheduled disassembly should beware. The only person possibly more mercurial than the richest man in the world is the self-interested leader of its largest economy.<\/p>\n","protected":false},"excerpt":{"rendered":"Mercury, Venus and Jupiter aligned in the second week of June and, for a moment almost as fleeting,…\n","protected":false},"author":2,"featured_media":823485,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[64,63,99],"class_list":["post-823484","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-au","tag-australia","tag-business"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/823484","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=823484"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/823484\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/823485"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=823484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=823484"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=823484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}