Scott Galloway on SpaceX IPO: "The Game Is Rigged" | Pivot

Thank you so much for having me.

People who are investing, people who are participating in the IPO, they're not buying SpaceX. You're betting on Elon Musk. You are buying Elon Musk. The amount of control he has over this company is unprecedented. And I'm not saying people should or they shouldn't, but that's who they're betting on. And it's extraordinary to me because even think about what you just mentioned with where he's taken to X and with regard to the protest in Ireland. We even haven't heard one word from the underwriters of like, are we okay with this? Do you remember it was five or six years ago when it's sort of like at the height of Me Too when Goldman had the big proclamation of like, we're only going to be doing deals with companies that have a commitment to diversity. And I'm like, where do we not have one shred of a moral compass here? And the answer is that we don't. No one is mentioning this. And when you think about how wealthy he's about to become, and I'm not insulting it or complimenting it, I'm just saying I just want people to realize this is a person who directly impacts what's happening in a war by pulling Starlink. This is a person who wants to control information so he buys a social media platform. This is a person who realized through Donald Trump he can invest in candidates and by investing in candidates get whatever he wants. Like the reason I think we're now seeing an unprecedented amount of money going into these elections is because Elon Musk and Donald Trump prove that it works, right? You're not just getting a little bit of influence. SpaceX's revenue, it says it right in the prospectus, comes from government contracts. And so we could all say this is hanky. This isn't how capitalism works. This isn't how democracy should work or free markets. But for the investment community, it's saying, in my opinion, if you can't beat them, join them. I'm here for the money. Here for the dough, Scott.

Sorry, what did you say? I couldn't hear you.

You know how to reach me. Gross.

Yes. DM, slide into my DMs.

That is correct. That is 100% correct. If there was a choice,

Yes. Anyway, move along and take her seriously, her thoughts, her deep thoughts on the situation with Musk. The thing that's not getting enough reporting is that essentially Musk's ability to lean on Trump, who then called Paul Atkins and said make the waiver of all previous rules and include this company in the NASDAQ 100, is going to create 30 to $50 billion in additional demand for a company with a float of 100 billion. So to use an analogy, imagine on any given week there's 100,000 people looking for homes in San Francisco and that creates a certain price discovery and certain pricing for housing. Imagine if all of a sudden, same number of houses for sale, there's 150,000 buyers. So when you look at the incremental demand of 30 to $50 billion, is what I've calculated from things like QQQ and MSCI indices that are now forced to buy a company that might be 4 to 6% of the index, meaning that 4 to 6% of their capital under management has to be used to buy SpaceX stock despite the fact, again, in a violation of pre-existing rules that has been waived, only has 5% of its float out. You have what is in my opinion the greatest degree of manufactured scarcity ever in an IPO, and this is about to be the greatest transfer of wealth from retail investors since crypto.

Yes, there's implications, but when you think about the stronghold that they have over the government, think about the amount of government contracts. When you say even if things go down, like once you are embedded in the government with these government contracts, it's like a tick biting you, right? Like you don't just get a tick bite and pull it out. The tick bites, all the tentacles pop out and it doesn't come back out. So when people even say, 'Listen, when we have a different administration and they see things differently, a lot of these things are going to pull back out.' Once you're this entangled in the government, it doesn't work that way. He's in. Well, what if the Democrats get in? Is he in there? There certainly, you know, Elizabeth Warren is of course always speaking up about, I know, I get it, I know. But she's speaking up at least. She's like, 'Look, this is not a good thing to... He's going to hurt retirees.' That's one of her things. She has a number of them. You have Bernie Sanders wanting a chunk of companies like his and other like an OpenAI or whatever. How many years have we talked about closing the carried interest loophole? How many years have we talked about banning or limiting or adjusting congressional stock trading? For a zillion years. How many years have we talked about social media regulation? And when Democrats had control? Sure. But I just think once you're embedded in the government, look at the case of Michael Dell. Okay, Michael Dell, glad he did donate $6 billion to the Trump baby accounts. Super duper. Trump then says everybody should go out there and buy Dell. The stock goes on. Trump buys the stock. And then Michael Dell gets a $9.5 billion government contract. I'll bet my bottom dollar that come December, if Democrats take control, I don't think that government contract's getting cancelled. Do you?

Well, there should be a price to pay because Democrats should be focused on two things as it relates to the midterms: affordability and accountability. If those are the two things that they can nail a message and a plan for, then they actually have a chance to take control here.

Listen, there's so much excitement. There's so much enthusiasm. I mean, I just saw something the other day with Jamie Dimon talking this up, and they're not even the lead underwriter on this. Like, there's just so... And listen, there's just so many people who are like, Elon Musk, the guy who controls the world, I don't know, let's bet on him. Like, people just want in. And especially as you can remember when at the height of COVID, when Trump, the control Elon Musk had at the time, like how he basically created meme stocks, right? Elon Musk, we're taking it to the moon, and people were all in. And I think nerds like us are reading all 22,000 words of a prospectus, but there's scores of people out there who are just like, I just want in, even if it's for a minute. Now, Scott, can you note you had noticed a vibe shift though, right? It feels... And then another friend of mine said they got a call from their broker to get into it now, which they thought was a bad sign. It wasn't an email, and they were way down on the list. Scott was talking. Scott, explain your feeling that the vibe is off, but maybe...

So they're creating a false market. Professional investors know this. So while Scott can be telling all of this as a warning or a problem and we should be concerned about it, even if professional investors fundamentally agree with Scott, and I'm sure they do, they're also saying, 'Yeah, but guess what? It means the stock is going to go up, right?' Buying a stock doesn't mean you're buying a house and you're locked into it for the next four years. And remember when Trump won and Doge was created, all three of us and scores of other people called Elon Musk a shadow president. And while he might not be sleeping on Stephen Miller's couch anymore and going into government agencies with a chainsaw, he still has an enormous, maybe even more, influence over the government. We just don't see him walking into the Oval Office with his son on his shoulders. And people know that. And when he's got that much influence over the government, or I'm not going to go as far as to say Trump in his pocket, but Trump at least, you know, on his shoulder, that for many people, while it might not be the right thing morally, is going to be the right thing financially. And that's what the markets are about.

What do you think about collective divestment of funds that automatically include SpaceX stock? Would that sufficiently communicate that a lot of people are not okay with the changes that allowed this to happen?

Yes, it would make a difference. Listen, any sort of economic boycott, and we've all talked about that, the only place you hit him where it hurts is an economic boycott. Like you can have the worst stories, you can have the worst headlines, you can drag all these guys to DC and have a hearing where Katie Porter pulls out a whiteboard and says you're naughty, naughty, naughty. They don't care. They got on their plane and they go home. But if there, when and if there are significant economic boycotts, then they have no choice but to respond. I just don't know if we're ever going to see something like that. Right? When we talk so much about, you know, Bezos and Amazon, and as people are saying like, I hate it or I hate those social media companies, they're saying it while they're scrolling through Instagram and then ordering Amazon packages. Scott, very briefly,

Right? That's true. That's a... Well, they'll say that at mine. Scott, you have a few minutes. Just a few more stories, very quick economic stories. OpenAI has filed for an IPO. The company has not yet decided on timing, saying in a statement, 'It may be a while because there are things we want to do that are likely easier for a private company.' I don't know what that is. Like what, orgies? I don't know. OpenAI has, last in their defense, there's a lot you have to do, explain, account for when you go public. It's not easy. OpenAI was last valued at $852 billion. The filing comes shortly after rival Anthropic's. Which of the three are you betting on? And how worried are you about the concentration of so much market value in just a few companies? Does it make the entire... Scott has been talking about how the entire market is fragile. The entire market is fragile, and I think the name of the game for all of them, honestly, is to be... You don't want to be the last one to IPO, right? There is this huge appetite for AI. Everybody's so excited, but there's so much, and there's potentially so much overdevelopment. I think you just don't want to be the last one when you've exhausted the market when it's already exhausted. Okay, Scott, anything really briefly?

Yeah. Yeah. If it holds up, if there's... In the case of OpenAI and Anthropic, especially as it relates to a retail investor, those are companies that people actually could say they know and they see more than they do SpaceX. That's a good point. All right, one last thing. Inflation was up 4.2% annually in May, the highest in three years. Much of the surge came from the increase in oil prices, obviously, which have risen 35% in the months since the US and Israel attacked Iran. But fear not, President Trump is feeling optimistic about the situation. Let's listen to a clip.

No, I love it. The numbers were great. You know what I really love? I love the inflation.

Well, two things. Like as somebody who spent his life deeply in debt, I guess he could say yes, inflation works for me. If you put it in full context, or when he tried to do a cleanup later, he's basically saying inflation's not bad. Think about where it could have been, right? People thought oil was going to be $200 a barrel. But the fact of the matter is, and he said just this week, like, listen, gas prices were really high when Biden was in office, which was the case when Russia first invaded Ukraine. But guess what? Those high prices and inflation, I would say, were the fundamental reasons why Joe Biden and subsequently Kamala Harris didn't win the election. Donald Trump promised to lower prices day one. He obviously hasn't done that. I think when he talks about affordability being nonsense or an old-fashioned term, I think he's telling the truth because he is in a gilded cage surrounded by people who are already super wealthy and they've made more money in the last two years than is even conceivable. But where it's politically devastating, and not necessarily for him because he doesn't need to be president again, but for every Republican running. That soundbite of the president, and that's what they'll use. Inflation's great. That hurts. You and I both have mothers that voted for Donald Trump, and I assure you, my mother does not think inflation is great, and she could tell you the price of London broil and the price of gas today. Republicans... I say London broil because that's an old... Would you like some London broil, Scott? Really briefly?

But not for Trump and the people who are around Trump, and he's happy as a clam in that bubble. I think if it wasn't for the war in Iran, he would be on cloud nine. And also, it just bears mentioning that for the three of us, it really doesn't matter because we own stocks, we own assets, we're hedged against inflation because our house goes up 4.2%, our stocks go up 4.2% because Apple will raise its prices. Who this hurts are earners that don't have assets yet. So, and let's be clear, revolutions don't start because people are unemployed. They start because people are working two jobs and are still hungry. And this is yet again another... Argentina's had 120% inflation. There's a class of people there that have always stayed wealthy because they own land. So the landowners and the stockowners, traditionally older people in the United States, are just fine. Inflation is yet again another transfer of wealth from non-asset owners who are earners to the asset owners. Kara, when people say, when wealthy people say they're panic-stricken over Zoran coming for capitalism and leading the eat the rich sentiment, he's not leading the eat the rich sentiment. Donald Trump saying I like inflation is fueling the eat the rich sentiment, and the mayor and the tech bros saying all manner of nonsense every day of the week and twice on Sunday is the same thing. It's anger. It's anger-inducing, and that's where you feel it, I think. Okay. Prediction on which of the IPOs coming, or is the stock market about to take a deep fall as many people think? So, which of all the IPOs, which one would you buy into? And are you worried about the stock market?

Listen, I've been saying I've been worried about the stock market for quite some time. And if you talk to, and I'll be quick, and if you talk to CEOs that are not the Magnificent Seven or that run companies that are impacted by tariffs or mass deportation, those companies are not booming. They are struggling. They can't walk into the White House and offer Donald Trump a plane or god only knows what. It's not so easy for them. So I think under the hood, things aren't great for lots of companies. But honestly, I can't... I'm not betting against the stock market because the only way it's been going is up, and a current appetite for AI. To me, it might be fragile, but it's big.

If I was hanging my morals out the window, I'd buy all of them.

I think we need a great big morning show. I think that especially obviously we cover politics, we cover current events, but the economy is the number one thing that people vote on. Tomorrow, as we talk about the SpaceX IPO, we're going to have a newly minted trillionaire. We are 16 years out from Citizens United and have more money going into politics than ever. And not just politics because, hey, I like this candidate. Politics because it's directly impacting policy. Not to mention the gargantuan grift and corruption under our nose right now. I couldn't cover all that in one hour. I thought it was important that we covered it in the morning for two hours and in a way that we're sort of setting the tone for what we cover here because it's not just about following Trump and the crazy thing he's saying today. We're fundamentally changing potentially the way our economy works, the way capitalism works, and I think we need to cover it in a comprehensive way. And you guys know this as well as I do, the way that business news has traditionally been covered. It's business news covered for an audience that invests in the markets. And when CEOs go on TV, they're not necessarily giving their worldview. They're talking about specific information about their companies that's going to impact their report, their stock performance that day. We need to have much bigger and broader conversations than that.

Yes. But also, I mean, yes, at 9 in the morning, but I also think, and you guys know this, I actually just talked about this in an interview the other day. I think that when people watch TV, yes, people watch live TV, but it's more you watch the show that you want to watch. And if you make an important show that matters, it doesn't actually... If Landman is your favorite show or Friends and Neighbors, and I said to you, 'What time is it on what day?' You might say like, 'Oh, I think it comes out on Fridays.' I think for me the most important thing isn't who's necessarily watching me at nine. It's how do we make the best show that counts because that's what people are going to want to see. Think about the way Pivot. Think about the way people consume Pivot.

Not just Scott. Not just Scott.

Oh my god. She saved the Knicks. Don't listen to him. Stephanie appreciates that.