https://www.youtube.com/watch?v=-X6YzlY_8tM

SPEAKER_00 [00:00]: Elon Musk is preparing the largest initial public offering in human history, at a one point seven five trillion dollar target valuation, SpaceX would be worth more than every American defense contractor combined, worth more than the market caps of Coca-Cola, McDonald's, Disney, Nike, and Starbucks all put together, and worth more than the top ten companies on the London Stock Exchange combined.
SPEAKER_00 [00:21]: So if you're wondering who the fuck is buying SpaceX, a company losing five billion dollars per year at the largest IPO valuation in history?
SPEAKER_00 [00:29]: Well, the answer is you, because within a few weeks your retirement account is going to be one of the biggest buyers of SpaceX stock, whether you like it or not, and that's because NASDAQ quietly introduced a brand new rule designed specifically to make that happen.
SPEAKER_00 [00:43]: But before we get to the rule, you need to understand why this all matters, because the only way a nearly two trillion dollar valuation makes any sense is if SpaceX is actually the company the public believes it to be.
SPEAKER_00 [00:55]: But it's not.
SPEAKER_00 [00:56]: If you ask ten people on the street what SpaceX sells, most will say rockets.
SPEAKER_00 [01:00]: Some will say Mars stuff, but both are wrong.
SPEAKER_00 [01:03]: SpaceX isn't just a rocket company.
SPEAKER_00 [01:05]: It's actually three businesses stacked on top of each other, and the rocket business isn't even the most important one.
SPEAKER_00 [01:10]: There's the good, the bad, and the ugly that comes with this company, and trust me, it gets pretty ugly.
SPEAKER_00 [01:15]: So let's start there.
SPEAKER_00 [01:16]: It's the part of Spacex that gets the most attention and creates the least value.
SPEAKER_00 [01:22]: XAI is mostly known for owning the social media platform, Twitter.
SPEAKER_00 [01:27]: Uh, sorry, I mean, the social media platform X.
SPEAKER_00 [01:31]: Anyways, it's also the AI lab Elon Musk founded in twenty twenty three to compete with OpenAI and Anthropic.
SPEAKER_00 [01:37]: And a few months ago, Spacex acquired XAI in an all-stock deal that valued the combined entity at one point two five trillion dollars, with XAI itself accounting for two hundred and fifty billion of that.
SPEAKER_00 [01:49]: If you're wondering how it's allowed for one of Elon's companies to acquire another one of Elon's companies, the answer is, I have no idea, but it happened.
SPEAKER_00 [01:57]: So with a two hundred and fifty billion dollar valuation, you'd assume XAI is a financially sound company, right?
SPEAKER_00 [02:04]: Or at least close to it, or at a minimum that the people who built it still work there?
SPEAKER_00 [02:09]: Well, none of those things are true.
SPEAKER_00 [02:11]: XAI was founded with eleven cofounders, researchers and engineers from deepMind, OpenAI, Google, and the University of Toronto.
SPEAKER_00 [02:19]: It was a true heavyweight team.
SPEAKER_00 [02:21]: But by twenty twenty five the company was burning more than a billion dollars a month, and by March of this year every single one of the eleven co-founders had walked out from the company.
SPEAKER_00 [02:30]: Then Elon, on his own social media platform, publicly admitted that Xai had to be rebuilt from the Foundation's up, which is the polite way of saying the CEO of SpaceX just paid two hundred and fifty billion dollars for an asset that needs to be rebuilt from scratch, and to say that XAI is overvalued would still be a massive understatement.
SPEAKER_00 [02:49]: OpenAI generates around twenty four billion dollars in revenue annually, and is currently valued at around eight hundred and fifty billion dollars.
SPEAKER_00 [02:57]: While anthropic generates over thirty billion dollars annually and is valued around four hundred billion dollars.
SPEAKER_00 [03:03]: But XAI who estimates a billion dollars in revenue was bought for two hundred and fifty billion dollars.
SPEAKER_00 [03:09]: So the market is pricing Xai like its emirates, but in reality it's more like spirit airlines.
SPEAKER_00 [03:14]: I like to look at XAI as the reverse Jerome Powell piece of SpaceX.
SPEAKER_00 [03:18]: Instead of printing cash, it burns whatever cash the rest of the business generates.
SPEAKER_00 [03:22]: But it's also only one of the three businesses inside SpaceX.
SPEAKER_00 [03:26]: The other two businesses are the ones actually doing the work.
SPEAKER_00 [03:29]: But before we get to the crown jewel, let's start with the one that gives the company its name.
SPEAKER_00 [03:36]: This is the part most people picture when they hear the name SpaceX.
SPEAKER_00 [03:40]: It's the rocket business.
SPEAKER_00 [03:41]: It launches things into orbit, satellites for the US government, cargo to the International Space Station, crude missions for NASA, and a lot of other satellites, which we'll get to in a minute.
SPEAKER_00 [03:51]: And the rocket business at SpaceX generated roughly four billion dollars in revenue last year, which may sound impressive, until you compare it to the two trillion dollar valuation.
SPEAKER_00 [04:00]: Then it suddenly doesn't sound impressive at all, especially when you realize the rocket business represented only about a quarter of SpaceX's total revenue last year.
SPEAKER_00 [04:09]: So this brings us to the third business.
SPEAKER_00 [04:11]: It's the one most people don't think about when they hear the word SpaceX, but it's also the one that investors care about most, and it's the one that's paying the bills for everything else.
SPEAKER_00 [04:22]: This is the crown jewel of SpaceX.
SPEAKER_00 [04:24]: Starlink is a satellite Internet provider.
SPEAKER_00 [04:26]: It's the answer to the question, What if Comcast but in space?
SPEAKER_00 [04:30]: Which sounds like the kind of thing a venture capitalist tweets at three in the morning, except in this case, Elon actually built it.
SPEAKER_00 [04:37]: And Starlink launched in Beta in twenty twenty, and six years later it's the fastest scaling telecom company in human history.
SPEAKER_00 [04:44]: There are now more than ten thousand Starlink satellites in Earth's orbit.
SPEAKER_00 [04:47]: Each one beaming Internet down to a little dish that sits on your roof.
SPEAKER_00 [04:51]: The dish points itself at the satellites, the satellites talk to each other, and somehow this works.
SPEAKER_00 [04:57]: Here's what entrepreneur and podcast host Scott Galloway had to say about Starlink.
SPEAKER_03 [05:03]: And then the best product, I think of the last few years has been Starlink.
SPEAKER_05 [05:06]: That's amazing.
SPEAKER_03 [05:07]: I just think it's absolute.
SPEAKER_03 [05:09]: I've done podcast from planes.
SPEAKER_03 [05:11]: I can talk to my sons on FaceTime.
SPEAKER_03 [05:15]: That product is, you know, all airlines are flying the same Tim can, same routes, same bad food, a real point of differentiation for them, and that's also in maritime I think Starlink is the best tech products.
SPEAKER_03 [05:27]: So power to him When they go public, is it in a spacec and amazing company, or is it overvalued?
SPEAKER_03 [05:33]: The answer is yes.
SPEAKER_03 [05:34]: Two can be true at the same time.
SPEAKER_00 [05:36]: Starlink has now grown to over ten million active subscribers in roughly a hundred and fifty countries, and in twenty twenty five, Starlink alone brought in eleven point four billion dollars in revenue, which is roughly sixty one percent of SpaceX's total revenue for the year.
SPEAKER_00 [05:50]: But Starlink's ability to generate revenue isn't even the most impressive part.
SPEAKER_00 [05:54]: It's the efficiency underneath that revenue which blows my mind.
SPEAKER_00 [05:57]: Two years ago, Starlink's profit margins were about forty one percent.
SPEAKER_00 [06:02]: This year it's now sixty-the percent, which means Starlink added over twenty points in margin expansion in just two years.
SPEAKER_00 [06:08]: So yeah, the margins aren't just good, they're also accelerating, and Starlink isn't just for consumer Internet either.
SPEAKER_00 [06:15]: There's a maritime version that ships and yachts use, an aviation version that commercial airlines have started to roll out, and a classified defense version called Star Shield with contracts at the National Reconnaissance Office and the Pentagon.
SPEAKER_00 [06:27]: So this is the real space.
SPEAKER_00 [06:28]: It's a satellite Internet provider that prints cash, a rocket business that's doing pretty good, but is valued like it's already colonized Mars, and after the February merger, an AI lab that lights roughly a billion dollars a month on fire, and in twenty twenty five Starlink and the Rocket business brought in roughly eight billion dollars in profits, which sounds great, until you remember XAI showed up to ruin the party, because the consolidated company of SpaceX, which also now includes XAI, ended up losing nearly five billion dollars last year, on roughly eighteen and a half billion dollars in revenue.
SPEAKER_00 [07:02]: So, let's go back to the question from earlier.
SPEAKER_00 [07:04]: Who the fuck is buying SpaceX at a one point seven five trillion dollar valuation?
SPEAKER_00 [07:10]: And our answer to this question from earlier still stands It's you.
SPEAKER_00 [07:14]: And this is where the real story for the SpaceX IPO actually is.
SPEAKER_00 [07:18]: It's not about rockets, it's not about magic satellites in space, it's about the financial system changing the rules right before the biggest IPO in market history.
SPEAKER_00 [07:27]: Because on May first of this year, NASDAQ adopted something called the Fast Entry Rule, and with SpaceX reportedly targeting a June date for their initial public offering, the timing for this new rule is extremely convenient.
SPEAKER_00 [07:39]: But before we get into how we've quietly changed the rules to roll out the red carpet for SpaceX, a quick pause, because this video is sponsored by Whisperflow.
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SPEAKER_00 [09:17]: And now back to that red carpet we rolled out for SpaceX, and where it actually leads.
SPEAKER_00 [09:22]: The Nasdaq one hundred is the gold standard for technology and growth companies.
SPEAKER_00 [09:26]: It's not only a badge of honor for companies to be included in it, but there's more than two hundred investment products with over six hundred billion dollars in assets that track the index, which means once you're included in the index, it basically forces every investment fund that follows the index to automatically buy your stock, which translates to billions of dollars of investment capital.
SPEAKER_00 [09:45]: And under the old rules a newly listed company had to wait at least three months before it could be added to the Nasdaq one hundred index.
SPEAKER_00 [09:52]: That waiting period existed for a reason.
SPEAKER_00 [09:54]: It gave the market time to discover the actual price before passive index funds were forced to buy in, but the new fast entry rule cuts that waiting period from three months to just fifteen trading days.
SPEAKER_00 [10:05]: It's three months of price discovery, compressed into three weeks, which speeds up the process for SpaceX to get that automatic demand coming in.
SPEAKER_00 [10:13]: But this isn't even the change that matters most, because there was also two other rule changes.
SPEAKER_00 [10:18]: There also used to be a minimum free float requirement to join the Nasdaq one hundred.
SPEAKER_00 [10:22]: A company needed at least ten percent of its shares actually available for the public to buy and sell.
SPEAKER_00 [10:27]: SpaceX is targeting a free float of four to five percent.
SPEAKER_00 [10:30]: Under the old rules they wouldn't qualify.
SPEAKER_00 [10:33]: Under the new rules, that minimum is gone, and Spacex suddenly qualifies.
SPEAKER_00 [10:37]: And then there's also the new hidden multiplier.
SPEAKER_00 [10:39]: This one is the hardest to wrap my head around, because buried in the technical language of the new rules is a hidden multiplier.
SPEAKER_00 [10:46]: For companies with a free float under twenty percent, NASDAQ now treats the float as three times bigger than it actually is, meaning a four percent float gets weighted as if it were twelve percent.
SPEAKER_00 [10:56]: A five percent float gets weighted as if it were fifteen percent.
SPEAKER_00 [11:00]: Here's what all this basically means.
SPEAKER_00 [11:01]: We've bent the rules and rolled out the red carpet for SpaceX.
SPEAKER_00 [11:05]: We've changed the listing requirements so that Spacex can join the index with just five percent of the company actually trading publicly, a float level that would have been an automatic disqualification six months ago.
SPEAKER_00 [11:16]: We've changed the price discovery timeline so that SpaceX skips the standard three month seasoning and gets dropped into the index just fifteen trading days after going public.
SPEAKER_00 [11:25]: And we've changed the waiting rules so that ETFs are now legally required to treat SpaceX's float, as if it were three times larger than it actually is, meaning we've built manufactured demand.
SPEAKER_00 [11:35]: And this is all unfolding right now, but it's not just SpaceX.
SPEAKER_00 [11:39]: OpenAI and Anthropic are both reportedly eyeing their own public listings this year, and both will almost certainly list with the same configuration the new rules were quietly tailored for, meaning the Nasdaqq didn't rewrite the rules for one company.
SPEAKER_00 [11:52]: It rewrote them for a class of companies, and SpaceX was just the first in line.
SPEAKER_00 [11:56]: So Nasda cleared the runway for Spacex.
SPEAKER_00 [11:59]: The question now is who actually gets on the plane, which brings us to the retail allocation part of the listing.
SPEAKER_00 [12:04]: Because while most initial public offerings allocate five to ten percent of the offering to retail investors, SpaceX is targeting thirty percent, and Brett Johnson, the CFO of SpaceX, told a room full of bankers on the record that retail is going to be a critical part of the IPO, and bigger than any IPO in history, because, in his words, retail buyers have been incredibly supportive of us and of Elon for a long time, and we want to make sure that we recognize that.
SPEAKER_00 [12:31]: Translate it out of corporate speak, the CFO of SpaceX told a room of bankers that the largest initial public offering in history is going to dump thirty percent of its supply on retail buyers, and not because retail buyers help with price stability, not because they help with long-term shareholder alignment, because they're loyal to Elon, and that's how this story unfolds.
SPEAKER_00 [12:52]: The buyers and sellers of SpaceX don't show up at the same time.
SPEAKER_00 [12:55]: The buyers are forced in early, the sellers are unlocked later.
SPEAKER_00 [12:59]: Shares move from insiders, sitting on a low-cost basis to passive funds and retail, whose retirement accounts absorb them at peak valuation.
SPEAKER_00 [13:07]: Portfolio manager George Noble said it best.
SPEAKER_00 [13:09]: Your ForO one K is the exit liquidity.
SPEAKER_00 [13:12]: Because if you have any sort of retirement account holding US stock index funds, then within a few weeks of the SpaceX listing you're going to own some stock, and you won't have a vote on it, you won't have a choice in it.
SPEAKER_00 [13:23]: The mechanics of passive investing will just buy it for you.
SPEAKER_00 [13:26]: So here's the corrected version of SpaceX.
SPEAKER_00 [13:28]: It's a mashup of three businesses that combined lost five billion dollars last year, listing at the largest IPO valuation in human history, and we're all going to be buyers within a few weeks because of manufactured demand.
SPEAKER_00 [13:40]: And there's a reason traditional financial media isn't covering it this way.
SPEAKER_00 [13:44]: It isn't clickable, because SpaceX to go public at a nearly two trillion dollar valuation is a headline.
SPEAKER_00 [13:50]: But NASDAQ quietly rewrote its float waiting methodology to engineer passive fund demand for an unprofitable company.
SPEAKER_00 [13:57]: Well, that doesn't quite roll off the tongue as smooth.
SPEAKER_00 [14:00]: So if you want to actually better understand what's happening in finance and economics, hit subscribe, because I can assure you one thing, passive investing was sold to you as the smart way to invest, low fees, diversification, you can set it and forget it, that it's the triumph of common sense over Wall Street's hot shot stock pickers.
SPEAKER_00 [14:19]: And all of that's true, but there's also a part of the pitch nobody mentioned, that the same mechanism that buys the index for you automatically also buys whatever gets added to it, without your input and without anyone asking you.
SPEAKER_00 [14:31]: So the feature that makes passive investing convenient and easy for you is the same feature that makes you a guaranteed buyer for anyone who can squeeze their way into the index.
SPEAKER_00 [14:40]: And right now somebody just squeezed their way in.