Big deal is an understatement for this week.

Does that mean IPOs are getting bigger? How do we think about valuing a company like SpaceX or any company that's looking to list? We have never seen a company grow at that rate, particularly one that's already got reasonable scale.

I don't know off the top of my head what OpenAI and Anthropic are looking to raise, but say they're all in the range of SpaceX, and they all want to raise about 50 billion on the open market.

That's like the entirety of the proceeds of 2025 across three IPOs.

This week it's a mega deal, not even just a big deal. Obviously the IPO market has been talked about a lot this year, a few big ones coming down the pipe.

But today the one we want to talk about, at least to start off with, I'm sure more to come, is the SpaceX IPO that's rumored for about June this year at close to $2 trillion. I think they're talking $1.5 to $1.75 trillion for this IPO. So big deal is an understatement for this week.

Fantastic. I totally agree. I think we're going to have an absolute blast today talking about the SpaceX IPO.

It's a fantastic case study, not only because of the scale of the deal, as you mentioned, almost $2 trillion valuation that's being touted, but also because of the cosmic timing.

They're scheduling the IPO to coincide with the alignments of Venus and Jupiter. So, a very interesting case study for us to explore today.

And in terms of what we're- I think that adds at least, what, $100 billion to the valuation, probably.

Oh, yes. Absolutely.

Yeah. Okay.

And maybe a little pressure on the timing as well, but maybe we'll come onto that topic. In terms of what we're going to cover, we'll start off talking about the state of the IPO markets at the moment.

We'll also talk about how we price an IPO, and specifically whether or not we think SpaceX's IPO valuation is achievable. We're also going to explore why SpaceX is going to be doing an IPO. And finally, of course, the big question that we love to ask is, who are the real winners in this deal? So Graham, please do kick us off with a bit of context and background about the state of the IPO markets.

So the IPO market does seem to be recovering a little bit after a dip in volumes. But in terms of last year, the IPO market raised just over $170 billion. And that was about a 40% increase from the year before. So it does feel like the IPO market is relatively healthy. And of course, we've got a few big deals coming down the year. So I think what's happening is these companies that prep for IPOs are just kind of seeing this increase in activity and thinking now is probably the time. I think the backdrop though, and the interesting thing to think about in terms of if you're an investor in one of these IPOs, how much value you might expect to achieve through participating in the actual IPO, is a lot of companies that are IPOing have been held privately a lot longer than they used to. So again, I can just pull up another stat here. This comes from Morning Star.

So in 2005, sorry, in 2025 rather, the median age of company, i.e. how long it's been since the company was founded until when it was listed, if the company's chosen to gone public, has gone from seven years to almost 11 years old. So that means we've got about a four-year increase in the length of time companies are held privately.

I think it's due to a few reasons, right? You have this huge backlog of private equity and private capital that has allowed companies to continue operating in the private realm just a lot longer than they had previously. And if you think about just the amount of dry powder in the private equity market, I think we're well over a trillion dollars.

Again, we think about the private equity and private credit stuff we've been talking about the last few weeks. Of course, it's not just the private equity dry powder you've got to look at. It's the private equity dry powder, the private credit dry powder, all the bank balance sheet availability.

There's just a ton of private capital available to keep sustaining these companies longer before the IPO.

And what that means is ultimately you're creating a lot more value in the private phase of the company, and you're potentially leaving less on the table for participants in the IPO to take advantage of post-listing. And that I think is one of the things we're going to spend a bit of time talking about today in respect of SpaceX.

Yeah. And Graham, what does that mean for the scale of the IPOs? Because I know we've often heard the news headlines talking about unicorns, $1 billion IPOs. Does that mean IPOs are getting bigger? In general it does, and I think it's also helpful to look at the split of sponsor-backed IPOs compared to non-sponsor-backed IPOs, where in 2005, sponsor-backed IPOs only represented 16% of deal volume, but 65% of proceeds. So I think what we're seeing is we've got this smaller absolute number of companies, but they're just much bigger.

They're backed by financial sponsors.

They're backed by all this private equity dry powder.

So when we see these companies being listed, they're just huge.

Again, SpaceX, we'll talk a lot about the valuation today.

$1 and 3/4 trillion dollar. That's massive.

Absolutely. But as you said, there's other really huge deals waiting in the wings.

We've got Anthropic and OpenAI also planning IPOs, rumored to be planning IPOs for later this year.

And there is potentially a risk, isn't there, that this creates oversupply of IPOs. They are competing for the same capital, and they are technically also competitors of SpaceX.

So I wonder how that could impact the dynamics.

Maybe we can come back to that later on.

But yeah, definitely, I think there is a sense that the private markets, yet again, are influencing what's happening in the public market arena.

100%. Now, why don't we talk, obviously, we're here to try to educate people a little bit, so why don't we talk a little bit about some of the technical nuts and bolts that goes into an IPO. And I think, on my mind, the first thing that always comes to mind is just valuation, right? Mm.

Valuation is a core part of corporate finance, whether we're talking about a listing or some kind of M&A activity.

How do we think about valuing a company like SpaceX or any company that's looking to list? Great question, Graham. As you say, all finance deals are underpinned, if you like, by the company valuation.

But there are some specific nuances or, let's be honest, challenges when it comes to valuing an IPO company.

I think the first challenge is the importance of comps. What I mean by that is that when we're valuing a company, we look around and look at comparable companies, and we look to see what multiple of their earnings or revenues that they trade on. And we use that to value the IPO company.

And that becomes so much more important during an IPO because we're really looking to see how the market prices valuation of this type of company. So comps take on real significance when it comes to valuing an IPO business. The second thing is the actual multiples that we use are slightly different. I know when we're valuing companies for many deals, we'll look at multiples of earnings. And although that does have some relevance for IPOs, we're talking about companies that often when they're IPO-ing, they're not yet at their full scale. And as the companies scale up, their margins, and therefore their earnings, are going to change quite significantly. So their earnings today aren't really a good predictor of their earnings and cash flows in the future.

So we put much more reliance on revenue multiples.

That's EV to revenue as a multiple.

And these can be really quite high multiples.

For example, if you look at the public markets at the moment, lots of mature companies will trade, even if they're relatively high growth, on multiples of maybe two or three times their revenue.

But when it comes to IPOs, we can see double-digit multiples of revenues. We've had, for example, Facebook in 2012 IPO-ing on about 25 times its revenue, and Cloudflare more recently IPO-ed on about 30 times its revenue.

Now, that reflects the fact that the market expects these businesses to grow very rapidly post-IPO. So we do see higher multiples, but let's come back to the point on what SpaceX is likely to be valued on. But I suspect that the valuation there will be quite stretching.

The multiple discussion here, I think it's just really interesting because in the private world where I used to do all my investing, you look at some high growth companies that you value on a revenue multiple basis, and the multiples we're talking about are three times revenue, five times revenue, at a crazy level, maybe 10 times revenue.

Mm.

And same thing on the EV to EBITDA side.

A really high growth business might trade for some kind of high teens multiple with a leverage multiple that approaches, I don't know, seven, eight times, something like that. These multiples just blow all those out of the water. So you do have to take a step back and just say, "How realistic are these multiples? And is the growth that we're being asked to buy into, in any way, shape, or form realistic?" It's a good point, Graham, because I actually had a look at how those IPOs had performed after they'd launched.

So, for example, Facebook, it had a pretty abysmal IPO, to be honest. But Cloudflare, which was still a very punchy multiple, actually performed very well post-IPO.

So, that just shows you how much judgment is involved in estimating the growth that is likely to be achieved by these companies. But even beyond that, the other challenges around valuing the companies is around the fact they are really unique businesses. So it's easy to say find a comparable company, but the reality is, if they're disrupting an industry with a whole new business model, well, how on earth do you find similar companies to use for your benchmarking process? We rely quite heavily on sum of the parts valuation for this, which our listeners are familiar with this, sum of the parts is where you basically break down a company into its segments, its different operations, and you value each operation as if it's an individual business, and then put it back together, and that's the value of the whole company.

Now, when it comes to IPOs, we often use something called reverse sum of the parts, where we say, well, actually, maybe there are other companies in the market that do a little bit of what this company does, and we know what that company trades on as a whole, and we know what multiple maybe the other parts of the business should trade on.

So we can back out a multiple that can then be applied to our very unique IPO business. So sum of the parts valuation is really important when it comes to IPO.

And then the very final challenge is really the importance of knowing the capital structure. That's how much debt and cash the IPO company will have after the IPO. And that obviously requires knowledge of the proceeds of the IPO and how those IPO proceeds will be deployed. Are they going to be used to pay down debt? Are they going to be used to fund growth in the business? Because it's only then you can work out, based on the valuation of the company, what the equity is worth.

And that is going to drive the IPO pricing.

Now, the IPO pricing itself is actually not that complicated in terms of the mechanics, because you start off by saying, well, what's the company worth in the market when it trades? But you then need to offer people participating in an IPO a discount, what we refer to as the IPO discount.

Because effectively, they're taking on the risk of price discovery.

They don't actually know what it's going to trade at in the market, so they're taking on that risk. We have to offer them an incentive to participate in the IPO, and that's what the discount aims to achieve.And that's the mechanics of pricing an IPO. But the reality is that when you're offering shares to investors as part of an IPO, you are also thinking about the appetite, the market sentiment, because really you care about investor demand.

So effectively, when you're pricing an IPO, you're kind of walking a tightrope between what the valuation is telling you and also what the market appetite is for that IPO as well. So there's all of these different sort of nuances, if you like, when it comes to IPO valuation.

And then beyond that is, of course, that the market is a moving feast.

It's volatile, particularly volatile at the moment, I would say, and that can disrupt the pricing. It changes what people would be expecting to pay at different points in time.

And that has been a real issue for some IPOs, where they've had to delay an IPO because although it's priced and there's appetite, suddenly there's a change in the market and they have to basically just put it on hold for a little while. Which obviously if you're trying to time your IPO to align with the planets, then that could be a bit of a headache for Elon Musk, let's be honest. So that's how you price an IPO in general. But let's really get down to the nitty-gritty.

And Graham, I know that you've been looking at how SpaceX might be valued. So can you tell us a little bit about that? Yeah. Let's talk about SpaceX in some detail.

And I also think this is a really interesting opportunity to look back at some of the stuff we've been talking about in previous episodes, talking about AI and finance. And we got AI. Actually, Debs, which AI agent, which AI service did we use for this particular model? It's a great question, Graham. So we used Endex, which has a plugin for Excel to generate an IPO model for SpaceX.

Okay.

And yeah, I know that last week in your discussion with Matan, you talked about AI at the moment being as good as a bad junior analyst. So we've put it to the test- Yeah ... haven't we? And tell us a little bit about this model.

Yeah. And by the way, we're going to paste a link to this model.

Look for that in the comments in the description if you want to go through it as well. And there are some things this model does well.

So in terms of outlining the valuation history, in terms of looking at the comp set, the comp set here is pretty tricky.

As Debs, as you mentioned, we don't have a ton of directly comparable companies to a company like SpaceX.

In particular, we don't have really many other companies doing something like Starlink.

There are a few other satellite internet providers, but not many.

Then we have the launch services, we have the government contracts mixed with the AI business. In some ways it's kind of a weird combination of stuff, so it's tricky to really do some fundamental analysis on what we think it should be worth.

But as a first pass model, this does an okay job.

So I think the first thing we want to walk people through is just the private valuation where SpaceX has been marked given the investment that's been made by private investments thus far. And we'll look at how that compares to the proposed valuation in the IPO. All right. So if we go back in history, in 2015, we have SpaceX valued at $12 billion. That's from their Series F.

We have another series of private transactions taking us all the way to the end of 2025, so not that long ago. And the mark on the company at the end of 2025 was $800 billion. Right? So just think to start off with, the valuation that we're being asked to subscribe to as potential IPO investors is more than double that valuation that really just closed a few months ago. The other thing to bear in mind is that $800 billion, this was before the combination with xAI.

So xAI was contributed into the group in, I want to say early 2026. And at that point, Elon just kind of decided, he kind of guided the market that the company should be marked at a valuation of one and a quarter trillion dollars. Now, baked into that increase, it's not all just xAI. I think what he said was xAI were carrying an evaluation of $250 billion. We'll get into that in a second.

And the rest is a markup on the rest of the SpaceX business. So I think with any business that's owned by Elon Musk, sometimes you just have to take a sec back and kind of ask yourself, how realistic are these multiples? How much are they just tied to this whole Elon Musk aura and marketing machine? And I do think there's a big aspect of that in this IPO in particular.

So if you want to get into the nuts and bolts of the sum of the parts valuation for SpaceX, if you download the model, we have this business valuation tab where this AI agent has done an okay job in terms of pulling together some comps, but they're pretty limited, right? We have a few business that does satellite communications, AST SpaceMobile, ViaSat, and Globalstar.

We've got a collection of businesses that do defense and launch services, but a lot of these are big conglomerates.

We've got Lockheed Martin, we've got Boeing in here.

So it's hard to make a direct comparison between those businesses and the SpaceX launch business.

And then we've got this one business direct to sell, Iridium Communications.

And the multiples for these businesses are all over the place.

So for the mature businesses, kind of as you expect, if we're thinking about these on a revenue multiple, which for a mature business, I would argue you don't tend to look at on a revenue basis anyway.

We're kind of in the low single digits.

We're like two, three times revenue.

This model's kind of funny though.

This is where when we talk about AI being as good as a bad analyst, this is where I'd say, okay, it's taking this median multiple of high growth companies and saying, all right, we've got a 77 times revenue multiple that we're using as a median calculation, literally between three multiples.

And if I just audit the cell in this formula, we're taking the median of a 500 times revenue multiple of 77 and 5 times. I think you're hard pressed to make any kind of logical argument that the median of those three numbers is in any way the right one to use.

Down below, if I look at the sum of the parts valuation for this modelWe've got the actual multiple assumptions baked in.

So we say Starlink consumer business 30 times revenue, Starshield eight times revenue, launch services five times revenue, this other direct to sell 35 times revenue. And then basically we have to back in based on the implied enterprise valuation, we back into what we think xAI is worth. And we've got this plug of 250 billion because this is effectively what Elon has said.

If we look at this on a forward revenue multiple basis, we're saying xAI is valued at 71 times revenue. If you look at it on a trailing multiple basis, I think we've said xAI revenue in 2025 was $500 million, not $500 billion. So we're at a 500 times revenue multiple implied on xAI. So if we look at some of the other really successful high growth businesses that have listed in recent years, like Cloudflare probably being the best example. Debs, that was what? 30 times revenue? Am I making- 30 times trailing revenue as well. Yeah.

30 times trailing revenue. Now we're looking at 500 times on xAI. If we look at the total valuation, you said 2026 estimated revenue for SpaceX, the combined entity, this is again looking to the end of this year, is $28.5 billion.

And then if we take the implied or the touted IPO valuation of $1.75 trillion, we're at 61 times revenue, again, on a forward basis. So I don't know, Debs, it just feels like the valuation here is, pun intended, sky high, space high, whatever we want our pun to be.

Yeah.

And people are just being asked to buy into a lot because it's Elon at the helm, and he's saying, "Hey, I'm going to colonize Mars and..." I don't know where we're going to get all this growth. It just seems crazy.

Yeah, Graham, I completely agree.

Effectively, if you back out of the target valuation of $1.75 trillion, the multiple that's required for that, we are talking a forward multiple of 60 times and a trailing multiple of 100 times revenue. And, for context, I believe that if I've run the numbers using some pretty simple assumptions, we're talking you need a decade's worth of annualized 40% revenue growth.

So growing each year at 40% per annum, and that just about gets you in the ballpark of the valuation they're aiming for. We have never seen a company grow at that rate, particularly one that's already got reasonable scale.

And as we mentioned, this is a company that's already quite large.

It's not starting off from a really small base.

So potentially it needs to be at a point where it's generating quite a big chunk of the US's gross domestic product to actually get to this valuation.

So I have to say, I'm already doubting whether or not this is achievable as a valuation.

So given the modern wonders of the internet, we actually just did a really quick search to find out what the Tesla revenue CAGR has been.

And this was a Tesla listed at a market cap of about 2 billion and delivered that revenue CAGR over, say, the first five years.

We're being asked to believe that literally the largest IPO in history, right? This would be the biggest listing ever, at just shy of $2 trillion, so a thousand times the size of Tesla.

And we're being asked to believe that's going to be a 40-something percent revenue CAGR for the next 10 years.

If you're an IPO investor and you're really excited about SpaceX, I really think you got to take a step back and just say, "Hey, is this even remotely within the realm of possibility?" So the only thing I would say, Graham, is that let's not underestimate Elon Musk. The Tesla IPO was absolutely phenomenal.

It was an IPO that took place in the shadow of the global financial crisis, where auto companies, particularly because of what happened to GM Motors, they were completely unloved. And so they pivoted the IPO to basically marketing it as a tech company, and it was a huge success. So I would say there is the power of Elon Musk behind it, but I just do not believe the numbers.

I really don't.

Fair. In some ways, I kind of hate that I own a Tesla. It just feeds into the whole Elon Musk thing.

I hate that too, Graham.

I know. But in my defense, I really like it.

Yeah.

All right. So regardless of the crazy valuation being talked about here, SpaceX hasn't actually come to market yet.

So when they approach the market, do we walk down from one and three quarters to one and a half or something even more reasonable? We shall see.

Regardless of the valuation, Debs, why is SpaceX wanting to IPO right now or at all? Yeah, and that's a really important question.

When there's an IPO, you should always ask, what is the rationale? And there's usually a whole host of reasons.

Companies IPO because they need to raise capital to fund growth.

They need to provide an exit for their investors from previous fundraising.

Sometimes it's to do with brand or trust building in the market, and sometimes it's even to obtain an acquisition currency so they can use their own equity to buy other businesses.

In the case of SpaceX, it's very definitely motivated by the need for additional funding.

You mentioned xAI that merged with SpaceX just in February of this year, and that is a business which is consuming about what is burning through about a billion dollars of cash per monthAnd they have big plans to develop a space-based data center, and they will need very deep pockets for that.

So I think they've already mentioned that they're looking to raise about $50 billion as part of the IPO, so that's going to be a big motivation for doing this. But then secondly, there is going to be the motivation that they need to get an exit for their existing investor base. You mentioned some of the earlier fundraising rounds.

These investors are sitting on huge paper gains, and they want to start to crystallize that.

So they will be looking for an exit.

However, they can't all rush for the exit at the IPO.

Usually, the bankers will advise the company to only include around 10% to 15% of the existing shareholder base in the IPO, because otherwise it's really not a good signal for the market if you've got all of the existing investors leaving, because it suggests they're not really confident in future growth.

So, there will be some exit for the existing shareholders, and that exit will probably be quite rewarding for them.

For those that don't exit at that point, or they don't fully exit, they're usually locked up for a fair period after the IPO.

It's usually between six and 18 months that there's a lock-up period that prevents them from selling, and it's usually staggered.

So, there'll be different exits at different phases post-IPO, but that's really important to know about as well because, again, that could create an overhang in the market.

When those shares eventually get sold, that will affect how the shares trade. So, there will be some exits, but not everyone will be rushing for the door at the IPO point.

And in terms of what we need to know about in terms of the IPO process, it's not a quick process doing an IPO. We know that it's been planned for a while.

Usually IPOs take, well, usually around 12 months, to be honest. There's a whole process they have to follow.

There has to be the appointment of the advisory bankers.

And it's not just one bank. Particularly for an IPO of this scale, you've got a number of different banks that are going to be involved in the advisory process. And I know there's been some headlines as to who's been appointed as the banks already. And all of them will want a share of the fees, and there's some quite rich fees involved in being involved in an IPO. Usually, it's around 5% of the IPO proceeds.

The work that the bankers have to do, well, they have to do some due diligence to check the operational financial health of the company.

They help to draft the prospectus, which although I don't know if anyone's ever looked at a prospectus, it looks incredibly dry. It's a legal document.

But it's technically a marketing document to allow investors to understand what they're investing in.

And that prospectus, it gets included in something called an S1, which is the first, or is a really important filing with the SEC when a company's about to IPO. And I strongly recommend anyone who's thinking about investing in an IPO or even the SpaceX IPO, you look at the S1 when it becomes available because it's the first time that a private company reveals its financials to the public market, and it's a really good thing to look through.

Get an understanding of what this company does, how its financials are looking, and that's I think a really useful bit of information when you're looking at an IPO.

The next step is that the company has to apply for a listing on an exchange, and we know SpaceX is looking to list on the Nasdaq. Its choice over listing is usually going to be based a little bit on the geography, but also the fact that the Nasdaq has a really strong reputation for tech companies, and obviously that's where SpaceX wants to be, to have its base is on the Nasdaq. There is also behind the scenes, we know that there's been discussions around the rules for the indices, and the Nasdaq has agreed to, or at least is considering changing its rules.

Usually, it won't allow a company to be included as a constituent in the index for up to a year after it's listed.

But SpaceX is looking for fast entry.

They want to be admitted to the Nasdaq 100 within 15 days of its IPO, which is extraordinary because normally they have to wait so they can prove that their price level reflects a fair market. They're looking for super fast entry, and the reason for that is obvious, which is because once you have been admitted to an index, then all passive funds have to own your shares. So, that gives them automatically a little boost to the share price performance after the IPO.

Once a listing- This has got Elon written all over it, doesn't it? Just fast track, fast action.

I know. Just change the rules.

Index.

Just for you. Rewrite the rules just for me.

Yeah.

Yeah.

Absolutely. And then once the listing's been agreed, then there's a marketing and book building exercise.

So basically, the company goes out and meets with investors.

It's a little bit like "Shark Tank" where the investors get an opportunity to hear the narrative about the company, but also an opportunity to grill the management team, and see whether they trust them with their money. I think that's going to be really interesting because obviously that'll be Elon Musk being involved in that process.

And it's also an opportunity to then start taking orders.

That's the book-building process, where they take the orders from the investors, and they finally get enough information to price the IPO because they see what the demand is within the price range that they're considering for the IPO.

Once the IPO is launched, the banker's job is not done.

They then have a responsibility in the aftermarket to make sure there's a nice stable price. It's one of the rare exceptions that banks are actually allowed to intervene and stabilize a price.

And that's because we want to see a nice stable trading for those shares after the IPO. So they basically get involved making sure there's adequate supply and demand for the shares.to stabilize that price. And then finally, that's when their job is done, and they've finished that IPO work, and they have earned their fees, I believe.

And just, Debs, on that, it's an interesting point to think about when you say, okay, this is the first time that... Or not the first time, but the only instance where banks are really allowed to get involved in the market and in some ways manipulate the market a little bit. So how do they actually do that? Yeah. It's an interesting question.

And so effectively they have a couple of mechanisms to do that.

So what they effectively do during the IPO is they sell more shares than they've actually been allotted by the company.

So they're effectively short selling.

And that means that if the share price rises after the IPO, they need more shares. And they have something called a greenshoe option, where they can go back to the company and ask for up to another 15% of those shares, and then they use those to fill the short positions.

And that's basically creating more demand in the market to stop the price from going up and up.

If the share price falls, then they have a short position in a falling share price, and that means they can go into the market and buy up the shares, creating more demand. That then stops the price from falling.

So effectively, they use the mechanics of supply and demand to stabilize the share price.

Oh, it's interesting. So yeah, if anyone's ever heard of the greenshoe in an IPO, this is exactly what that provision does.

Do you know why it's called a greenshoe provision? I think it's to do with the first time it was used, but don't quote me on that, Graham.

Yeah. It's funny. I asked the question, but I had looked up just as a quick history lesson because- Yeah ... it's one of those things I feel like I probably knew when I got my analyst training 20 years ago- Yeah ... but I couldn't remember what it was.

And yeah, it was, I believe, the Green Shoe Manufacturing Company- Yeah. That's- ... something like that- ... ringing bells now ... was the first company- Yeah ... to use this provision, and it just persisted.

Yeah.

So yeah, quick history lesson.

Excellent. Another thing I'll just add on the IPO process is that you might have heard of SPACs, special purpose acquisition companies. These were widely used for IPOs, so around the late teens, early 2020s, as a way of doing a really quick IPO.

As I mentioned, a normal IPO takes about a year.

A SPAC accelerates the process by effectively listing a shell company, that's an empty company, on an exchange, and that shell company is loaded up with cash, and then it goes and buys a private company.

So effectively, that private company becomes public through an M&A deal, but with no one else. It's just into a shell company.

And that is a useful mechanism if you need to accelerate the process and also if you need a bit more certainty over the valuation.

And I think neither of those apply in this situation with SpaceX.

They don't need it to be quick. In fact, they're trying to time it with the planetary alignment. But also, they are looking for a really ambitious valuation, and so for that, they need to go through the marketing, the book building. They need to be able to sell the story, as it were, to investors. So, that's probably the reason they've not gone through a SPAC IPO this time.

It'll be interesting to see how this all plays out, and it sounds like it's not going to be that much time.

I know we say they have plenty of time, but as far as IPOs go, as far as huge IPOs go, still pretty quick.

And it sounds like we'll have some kind of clarity on where we are perhaps by June. Do they meet that timetable? I guess that remains to be seen.

Yeah. It's a good point, Graham.

So we'll see over the next few months.

Yeah, and I'm sure we're going to talk about this deal again as we get a little bit later into the year.

Also, as we get a bit more clarity on some of the other ones that are coming down the pipe. Of course, the three big ones everyone's talking about this year are SpaceX, Anthropic, and OpenAI. And actually, I was just thinking, if you look at the funds raised in IPOs last year in total, I want to say it was like $170 billion. I don't know off the top of my head what OpenAI and Anthropic are looking to raise, but say they're all in the range of SpaceX, and they all want to raise about $50 billion on the open market, that's like the entire IPO proceeds of 2025, which was across, I want to say, 1,300 IPOs.

Mm-hmm.

Acknowledging big disparities in terms of size, a few big ones and a lot of little ones. But that's like the entirety of the proceeds of 2025 across three IPOs.

Yeah.

That's wild.

It is wild. And I have to say, I think it makes me very bearish about how this IPO could play out for SpaceX, because as I mentioned earlier, you're competing for the same capital and in the same space. It's basically AI.

So before we touch on whether or not we think this is going to be a successful deal, Graham, the big question we always like to ask on this podcast is who the real winners are going to be in the deal.

And I really want to get under the hood of who's going to be the big winner here. Is it going to be Elon Musk or someone else? What do you think? Look, I think if we get anywhere close to the valuation that he's talking about, then he, of course, is going to be the big winner.

And actually, it's interesting to just take a step back and think, is part of the valuation here Elon just wanting to be the world's first trillionaire? That could be part of it. The guy's ego is just insane. So if you think about who's really going to win here-Let's look at this in the context of not just SpaceX, but most companies that are listing, being private for a longer period of time, having more time to raise capital in the private markets, build a lot more value while they're private. So realistically, the big winners here, unless there's something we just don't know about and SpaceX is going to do all kinds of crazy stuff and hit that 10-year 40%, 50% revenue keg or whatever they need to hit to really justify this valuation, the people that are going to win here are Elon as the biggest shareholder, and then all the early investors, really early employees in SpaceX. If they're not able to, to your point before, sell everything immediately, they're going to build a ton of paper value, and they'll be able to offload shares really as time goes by.

I mean, who knows where the valuation trades for SpaceX after it lists. If it starts at $2 trillion and then trades down, I don't really know. But if we get anywhere close to that level, all these guys are going to be pretty big winners.

And I think the only way you're going to be a winner as an IPO participant is if you really believe that something huge is coming that is not really baked into any of the numbers we've seen so far.

And is that a space data center? Is that colonizing Mars? I don't know. But I think you have to be a believer in that kind of stuff to justify participating in this IPO, I think.

Yeah, and I think there is a risk that some of the exiting shareholders are also participating in the actual IPO.

You'll have funds which have, for some of these big asset management firms who invested early on, and then other funds within the same asset management firm then will then participate in the IPO itself as part of the price discovery.

Is there a risk that that's kind of creating a slightly inflated price for the IPO, which then really does put other participants in the IPO at risk? Obviously, you can absorb that if you're already sitting on a paper gain.

You don't mind not having such advantageous IPO terms. But then for those that are participating for the very first time with the IPO, then maybe that's more risky for them. So I think there's some really interesting nuances here around who's involved, who's participating that's already been part of earlier fundraising rounds. So I think that brings us nearly to the end.

But Graham, I'd really like to hear from you.

Based on our discussions, what is your key takeaway around the SpaceX IPO? It's wild. No. I mean, I think the key takeaway for me is it does seem like we're living in a world now where real fundamental valuation almost doesn't seem to exist or apply here. Right? Because look at the metrics that we're being asked to believe here.

We can kind of back into some kind of sum of the parts, try to justify it. But to your point a few minutes ago, you were talking about xAI. It's being valued at, I want to say, $250 billion, burning cash at a billion dollars a month.

And the valuation multiple on a historic basis that's being applied here is literally 500 times revenue. It kind of makes you take a step back and say, "What's the point of corporate finance and valuation if we're just literally going to throw all of it out the window and kind of believe some of this silly math?" And maybe once we approach the market and people come to maybe a similar conclusion, this valuation gets pulled down a little bit, we'll have our answer. Or people are just going to get so excited because it's Elon Musk. You got a bunch of unsophisticated retail investors who just say, "I want part of that space company," and they buy up these shares and support this valuation.

So key takeaway for me is we're living in crazy times, and it seems like they're only getting crazier.

I totally agree with that. I think my key takeaway would be that this IPO will be very big on excitement but low on value for investors participating in the IPO.

And I definitely am a little bearish on the valuation, on whether they can achieve it.

$1.75 trillion as a valuation, I know we keep saying it, but it is a really big number, particularly when other investors know we've got Anthropic and also OpenAI as other IPOs in the pipeline, competing businesses.

They can't all achieve the level of growth needed to achieve the valuations that are being touted.

So I think the question- Yeah ... is who's the winning play here? Did you ever watch "Austin Powers" back in the day? Of course. I loved it.

Yeah, I kind of feel like we're in that world. It's like it's literally Dr.

Evil right now. What's it worth? Like $100 trillion.

Like sure. Like that's the world we're living in now.

So it just- Totally ... it makes me think everything's going crazy.

Great. So Elon Musk and Austin Powers, separated at birth.

Not real.

Exactly.

So that's it for today's episode of What's the Big Deal? We hope you enjoyed our deep dive into the SpaceX IPO.

Please do follow us and leave us a rating and subscribe if you're watching us on YouTube.

All right. Take care, Debs. I'll talk to you next week.

Thanks, Graham.