The following commentary is a dialogue between CEO Nick Bernardo, CFP® and CIO Matthew Haraburda CFA®, CFP®.
Nick Bernardo: If you’ve been watching the news, you’ve probably noticed that the big topic right now is the SpaceX IPO. We’ve been getting a lot of questions from clients about what it is, whether it’s attractive, and whether we should be getting involved. We wanted to take the opportunity for Matt and me to talk through it. Matt, as our Chief Investment Officer, let me start with the basic question: what’s your overall take on the SpaceX IPO, and is it something we should be interested in?
Matthew Haraburda: Absolutely. As we approach the pricing date, trading is expected to begin around June 12th, though dates can shift. I think this is going to be a genuinely momentous event in the markets for a couple of reasons.
First, you’re seeing the underlying indices rewrite their own rules around whether to include some of these mega-IPO companies. SpaceX, OpenAI, and Anthropic are so large by market cap that index boards, including S&P Global, Dow Jones, and Russell 3000, are reconsidering what companies are even eligible for inclusion. It would be a mistake to ignore the scale of what’s coming to market and the way it’s going to change how IPOs work going forward.
Nick Bernardo: That valuation question is something I think about a lot. Most people understand that the big money was made through early private investments in SpaceX. We looked at some of those along the way and never got fully comfortable with the structure. Now we’re sitting here looking at the IPO, and the valuation, in my view, is incredibly high. We’ve seen this before with large tech companies pushing hard on valuation at the time of their public offerings.
What’s your perspective on that valuation, and what should investors make of it? Is there something worth acting on now, or is this a wait-and-see situation?
Matthew Haraburda: I think this IPO is different for several reasons. One of them is that the price has already been set. SpaceX has announced they’re pricing at $135 per share, and I expect that will hold. But here’s how I think about it: if you’re going to institutional investors at a fixed price and there’s still a meaningful amount left over for retail investors, that typically signals institutional participants aren’t interested at that level. My view is that it’s better to wait and see what happens in the secondary market. There’s going to be significant volatility early on.
What I think matters more is how quickly SpaceX gets added to major indices. Passive vehicles are required to purchase a proportional stake once a company is included. The challenge right now is that there won’t be a lot of float when the company first goes public, since many early private investors still don’t have full liquidity. Watching how that dynamic evolves, and how much additional stock comes to market over time, is going to be very telling.
Nick Bernardo: That’s an important point for our clients and network to understand. If SpaceX gets added to a benchmark index, the passive ETF products we already own will naturally acquire SpaceX exposure in order to replicate that benchmark. In many cases, our clients will become SpaceX investors without making any active decision, in the right proportion according to their asset allocation.
That’s consistent with how we think about this. We’re not a firm that picks individual stocks or tries to time these events. Our view is that markets are efficient, and that meaningful events like this will be reflected in our portfolios appropriately over time.
Last question, Matt. Looking beyond SpaceX to Anthropic and OpenAI on the horizon: do you see a broader shift happening in the IPO market? Is appetite waking back up? Are there other structural things you’re watching?
Matthew Haraburda: Capital market professionals I speak with believe there’s enormous pent-up demand for all three of these companies going public. I won’t say the floodgates will open, but I do think appetite for IPOs broadly should pick up depending on how these first ones trade.
To put the scale in perspective: there has never been one company of this size come to market, let alone three. If SpaceX, OpenAI, and Anthropic all go public this calendar year, which is what it’s shaping up to be, they will collectively represent approximately 5% of the S&P 500. We’ve discussed the concentration already present in that index, but SpaceX alone is likely to enter the top 10 companies by market cap at its IPO price.
One broader theme worth watching: the AI trade is not confined to these three names. You’re seeing enormous capital being raised in both fixed income and public equity markets related to AI infrastructure and the companies surrounding it. People have started joking about an “AI is everywhere” trade. We’re believers that this is genuinely trickling down through the broader market, and that’s what we’re paying closest attention to as we think about portfolio construction.
Nick Bernardo: Thanks, Matt. As always, we’re happy to dig into any of this on a more personal level with clients and the broader network. Thanks for your time.