“SpaceX Is a $10 Stock” | Office Hours

Scott Galloway kicks off this episode by dissecting Elon Musk's controversial financial engineering strategies, particularly concerning SpaceX's IPO. He then transitions to addressing listener queries on navigating workplace dynamics and the age-old dilemma of urban versus suburban living for families.

SpaceX's IPO: A Masterclass in Financial Engineering?

Galloway presents a critical view of Elon Musk's financial maneuvers with SpaceX, highlighting how Musk convinced regulatory bodies to include SpaceX in the NASDAQ 100, an unprecedented move for an IPO. This inclusion mandated trillions of dollars from funds to invest a certain percentage of their capital into SpaceX shares, creating an artificial surge in demand right out of the gate. This, combined with a smaller-than-usual public float of just 5% (compared to the traditional 10%+), created a perfect storm of high demand and limited supply, driving the stock price to an astronomical valuation.

SpaceX's IPO valued the company at an astounding $1.8 trillion, making it the largest IPO in history, surpassing even Saudi Aramco. This valuation translated to roughly 94 times revenues, far richer than any company in the S&P 500. However, this inflated valuation was short-lived, with the stock zooming to $225 before falling 45% to $123. Galloway argues that this initial pop, followed by a significant decline, was a predictable outcome of Musk's financial engineering, which prioritized immediate demand over fundamental valuation. He predicts the stock is still overvalued and could drop to $10-$30.