William Edwards at Business Insider asked investing professionals whether to buy the SpaceX IPO or stand by. The offering aimed to raise $75 billion at a $1.75 trillion valuation for a company that is not yet profitable, with an unusually large 30% of shares allocated to retail investors.
That retail allocation was the part I questioned. My read to Business Insider: it is either a money grab to get as many inflows in as possible, or there is not as much appetite for it at the institutional level as they had expected. Neither reading is a reason to rush. Institutions negotiate price and get information. Retail buyers get the price after it has been set, and they get it in a stock that will trade on excitement for a long time before it trades on results.
My advice for clients who want in was the same as it always is for a hot IPO. Decide the maximum share of your portfolio the position is allowed to become before you buy, and keep it small enough that a 50% drop in year one does not change anything about your plan. Then wait. Most IPOs give patient buyers a better entry point in the first 12 months than the opening print.
There is no requirement to own SpaceX on day one. There is a requirement not to let a rocket company become the plan.
Read the full article at Business Insider →
