This makes Elon, now that this company's gone public, richer than the bottom 46% of the entire world population combined. So, he has more wealth than 3.8 billion people and the southern hemisphere.
Yes, we just need to state the facts here. This guy's worth a trillion dollars. That's absurd. That's crazy. There's no way that that is going to be efficiently allocated throughout the markets. That to me doesn't say that the markets are working as they are intended.
Today's number: 40,000. That's how many bottles of wine are in Joseph Stalin's wine vault, which the Georgian government unsealed for the first time last month. That, I don't know if you heard, but an alien race of women have been abducting men with especially large dicks. So, you're safe. And also, this spaceship is just [__] amazing.
Ed, I couldn't find a joke about Stalin that wasn't really, really bad.
Yeah, I can imagine. Really bad.
You found your way to aliens and dick size, which is always a good combination.
I thought it was good. I think it works.
Little ribbing of the co-host. Nothing wrong with that. That's what they come here for.
My love language is giving people a hard time and then giving them money.
That's true. That's true. How are you, Ed?
I'm doing well. You're in Sweden, I understand.
Yeah. I'm in Stockholm, which has not participated in a war in 200 years, and that's why it's such a beautiful city. Something happens when you avoid the most wealth-destroying events in history. You avoid wars. It is beautiful. I can see you living here. You look like you'd fit in here. You look very Swedish.
100%. Yeah. I was there a couple years ago for a speaking gig and I just loved it there. It was beautiful.
No, it's like 60, 65 degrees, and what it is is it's light. It basically never gets really... it kind of feels like from 11 p.m. to 4 a.m. it just feels like dusk. It's a little weird. I think I'm a little bit manic and now I'm crashing.
Wrong day to give up meth, Ed. Wrong day to give up meth.
Well, you're missing some incredible vibes here in New York.
Coming off of this unbelievable win. I mean, we're recording this before game five, so who knows what'll happen by the time this episode goes out. But vibes are electric here. I mean, this is a whole another reason to be in New York. It's just unbelievable. And if we continue this, if the Knicks continue to be as dominant as they appear to be, I really think that this just changes the meaning of summers in New York. I mean, this is like everyone on the streets on a random Wednesday night until two in the morning. You can either be upset about that or you can love it. But the point is, I mean, this city is on fire right now, and it's all because of the Knicks. So, you're missing out.
That's so [__] up. I was supposed to be there this whole week. I told you this, right? I was invited to the Chanel party, to the Tribeca Film Festival, to game two or three of the Knicks. I was going to have such a good time and I had all these cool business meetings lined up. And then I got a little bit drunk and I saw one of those [__] TikToks saying that 90% of the time you spend with your kids is over by the time you're 18. And I freaked out, bombed to the airport, went home, walked in thinking I was like MacArthur returning to his loving family or Phil from Phil Dunphy from Modern Family. I walk in, my two boys are there and literally this is what I got. That's it. They nodded. They kind of turned their head and looked up like, 'Hey, bro.' But no, 'Hey, bro.' Nothing. Literally nothing.
And then what'd you do? Did you punish them? You got to punish them for that.
I have never punished my kids once. I threatened to punish a lot. I threatened to punish... that's it. I'm taking your phone away. And then I realized they use their phone to order food for me and to order the Five Guys, such that I don't starve, and it's how they get on the subway with their phone now. Anyways, but yeah, they didn't appear to miss me. I [__] up. I would love to be in New York right now.
Well, you learned your lesson. Basketball and sexy parties over kids every time.
100%. What am I thinking?
And now you know and can take this forward. You have some learnings and you can change your behaviors. So, there's always a silver lining to messing things up. I'm going to overwhelm my impostor syndrome with sincere incompetence.
I like that. I like that. That was clever. I'm going to think about that, too.
All right. Well, we have a lot to get into here. Shall we get into our stories?
The biggest IPO in history has finally arrived. SpaceX began trading under the ticker SPCX at $150, an 11% jump from its IPO price. And as trading began, shares rose to around $160, which is close to 20% up from the original IPO price. The debut marks a historic milestone for Elon Musk, whose net worth has now surpassed $1 trillion. Elon is officially the world's first trillionaire as of this IPO. It's also a major moment for the broader market. After years of waiting for the private market's biggest winners to go public, investors are finally getting their chance, with Anthropic and OpenAI expected to follow. SpaceX is the first in a wave of blockbuster IPOs that could define the next era of the public market. So Scott, let's get into this. SpaceX's IPO price, the issuance price, was $135. We were all wondering if it would pop as soon as it started trading. My prediction, you might remember, was that the stock would pop immediately 25% as soon as it started trading. It immediately seemed like that was the case because we were hearing murmurs that the stock was going to go out at 170, maybe close to 175, but then as soon as it officially opened, it opened at around $150. That's an 11% jump. A success, but not as much of a success as many of us, including myself, predicted. And now we're discussing this during the trading day on Friday and shares are hovering around 160, moving up to 165. It's incredibly volatile right now. Let's just start with your initial reactions. We can get into the valuation too. Some interesting new news also the fact that Elon is now a trillionaire. But let's start with your initial reactions to this stock finally going public.
Well, if Elon Musk had a dollar for every racist and stupid tweet or thing he's ever said... Oh, wait. He does now. He does now, Ed. You know, I try to get excited about this because a lot of people, you know, you could argue a lot of people have been made... I talked to someone here in Stockholm who works for one of the investment banks taking them out, and he reminded me, he's like, 'Look, it's great for economic growth. There's supposedly more than a dozen or a dozen and a half people just in Texas who no one's ever heard of who became billionaires today. And they'll go start companies, make investments, buy things, fuel the economy. And you also see, you know, people excited about the markets, more capital flowing into the US markets. They're going to spend that money, economic growth, GDP.' The problem I have is where I come back to earth here is that who is funding all this and where is that money coming from? And I still would argue this is the greatest transfer of wealth we've seen, at least in a short time, from retail investors to a small concentration of people since crypto. And I'm, you know, I'm a boomer. I just look at this and I think it doesn't make any sense. And what I think we have here, and it hasn't gotten enough discussion, is the greatest and most scaled example of manufactured scarcity. I was walking around Stockholm today and I walked by an Hermès store and they purposely have a line. I looked in the store, it wasn't that busy, but they purposely create a line to create the sense of scarcity. And then if you go in and try and buy a Birkin bag, they put you on a waiting list and they tell you, 'Oh, no, no, no.' And these are not complicated things to manufacture, but they want to create the illusion of scarcity or manufactured scarcity. And what I don't think people are focused enough on here, and there's been news on it, but it's really, I think, the whole shooting match, is that Musk threatened not to go public on the NASDAQ unless they waive the 12-month requirements for him to be included in the NASDAQ 100. So, they backed down. They blinked. The S&P said no. The Dow Jones said no. But the NASDAQ blinked. And the result is they're immediately included in these indices. If it's at $2 trillion and there's 50 trillion of market cap in the NASDAQ 100, that means all the indices that track the NASDAQ 100 now have to put 4% of their assets under management into SpaceX stock, creating anywhere between 20 and call it $50 billion in additional demand that no IPO benefits from. In addition, traditional IPO rules are that you have to issue at least 10% of your shares. They didn't. They issued 5%. So, massive artificial demand, or demand that no one else has benefited from, from constrained supply that no one else has been able to manufacture. And what you have is a pop, a 20% or 25% pop on what I think is manufactured scarcity. Now the question is where do you go from here? And I would argue someone called me and said I have access to shares. Should I do it? I said I think you should, but I would look at this as a trade, not as an investment, because eventually that manufactured scarcity begins to leak. You know, lockups come off after a couple earnings calls, there will be some settling around where the stock, you know, reasonably should be. But I think what we saw today was going to go down in the history books for bankers. The NASDAQ backing down, Elon Musk's power in the marketplace, creating a level of manufactured scarcity the likes of which we have never seen before. And just the last thing, this person told me who works at one of the lead underwriters is they did no less than 500 calls with high-net-worth investors, taking them through the deal and why it was a good idea. So you have had some of the most talented people in finance basically crawling over anyone with a heartbeat or a pulse, high-net-worth, retail, etc., to try and create unbelievable demand. So the bankers have done their job here. I think they're going to get about a half a billion dollars in fees. I thought it was a billion, but someone corrected me and said it's half a billion.
Yeah, I think it's a little more than that. Around $650 million in fees.
Yeah, there you go. But again, the key to a luxury brand, the key to irrational margins is manufactured scarcity. And we've never seen it like this.
He's the king of the markup. Let's just look at the valuation here. It's currently at around $2.1 trillion. So that means it's trading at 112 times last year's sales. We've pointed this out before, but Meta went public at 28 times trailing revenue, and they were growing revenues 88% the year before the IPO. Google went public at about 10 times trailing revenues, growing revenues 240% the year before the IPO. This is more than 100, and it grew 33% last year, and in its most recent quarter it grew 15%. So it has, I mean, massively lower growth than some of these other IPOs. In fact, more than an order of magnitude lower growth than many of these very successful tech IPOs. And then we can just look at the comparison to the price-to-sales multiples of some of the Mag Seven companies today. Meta is trading at seven times sales. Microsoft at less than 10 times sales. Alphabet's at around 11 times sales. I mean, right there you have your answer. This is wildly valued as a company. And the question, of course, is why are people down to pay this much? And I think Gil Luria said something really true and really striking on the show when we had him on last week. He said that Elon, essentially what he does, he has this trick where he has his business that he sells for today, the business of tomorrow, and then the business that's way out in the future. In the case of Tesla, you have the cars today, and then you have the robo-taxis tomorrow, and then you have the humanoid robots way out in the future. And in the case of SpaceX, he's done the same thing where you have Starlink today, you have orbital space-based data centers tomorrow supposedly, and then way out in the future, you have asteroid mining, and you have building civilizations and populations on Mars. And all of that is a function of storytelling. That's basically all he's doing. In the same way as you described that Hermès can mark up their handbags to these extraordinary prices because they're really good at selling the brand, creating a culture and creating an ethos around the brand, and that's what allows them to do it. Elon is doing the exact same thing here. The question is how long does this last? I mean, I predicted, I think you predicted, I think many of us predicted that on day one this would be a hit, and I gotta say it's been a little bit, I would say, underwhelmed compared to what expectations were. I thought it was going to be 25% immediately, and I saw a world in which it could go even higher than that. We looked at an 11% jump right at the opening. But again, the question becomes what is it going to look like over the next five, six, seven, eight months? What's going to happen as the lockup periods expire? And we could also note that there are some kind of funky lockups compared to traditional IPOs, which usually there's an 180-day cliff, and instead SpaceX has opted for this rolling release valve where they essentially let you sell your stock in what is essentially 20-day increments. It starts after 70 days, and then 90 days, and then under 120 days. It's a kind of complicated setup which is designed to make it easier to sell your stock over the short term. And my assumption is we're going to see unprecedented selling because I think everyone knows this thing is very hot right now. It's in demand. Big day on the IPO, and that is somewhat what we're seeing. But then over time they're going to start to realize, okay, now I want to cash out. Now I'm going to sell. And so my expectation is that the stock is going to get cut in half over the next six months as the lockup periods expire and as all of the hype and the excitement starts to wear off.
There's just so many things here that lead to a transfer of wealth and power from the little guy to the big guy. So for example, $3.75 billion was reserved to give to like friends and family with no lockup. So why wouldn't they give those to, I don't know, journalists who say nice things about SpaceX or to Trump Jr.? 'Hey, we have worked with our bankers. We think there's going to be a 20% pop here. You know, would you like an easy 2 million bucks? Put 10 million in. Not that I'm recommending this, but you can sell on the first trade if you want. We think there's going to be at least a 20% pop.' And meanwhile, the retail investor who might be subject to these weird lockups is crazy. What you're effectively doing is creating a different class of stock. You're not supposed to do that. My understanding of securities law is that when one class of stock has different trading rights than another and you're not an insider, you've created a different class of shares.
By the way, I just want to clarify, the retail investors actually can sell if they want to via these brokerage apps, but supposedly if they do sell, then apparently they're going to be not allowed to buy into future IPOs. So you're allowed to, but the platforms are setting it up to discourage you from doing that.
So call it a soft lockup.
But when you create different conditions on the sale and purchase of a stock, you're creating a new equity unless you're an insider. Somehow I thought that was illegal according to the SEC, but supposedly that's now legal.
We don't have much of an SEC anymore. Yeah.
Yeah. So this is again, you know, it just feels like look out below. The thing I wasn't anticipating, and I'm curious to get your thoughts on it, I would have thought that the other guys would have traded up in sympathy. And according to Mia here, Rocket Lab, EchoStar, and Space Mobile had declined 10, 12, and 14% respectively. I would have thought they would have traded up in sympathy with this. I don't know if it's because people had to sell that stuff to get into this.
Correct. What, you think that's it?
100%. And this is the thing that we were saying last week in terms of the equity supply, and we've seen this with a lot of the big tech names. We saw this with Microsoft and the Mag 7 stocks and some of the chip stocks even, where in order to fund the incredible demand, essentially, or I guess given the massive injection of supply that has entered the markets because of the SpaceX IPO, a lot of people didn't have the money to fund that. And so what did they do? They decided to sell their positions. And this is what I said to you on the show last week. If you don't have the money available to buy the SpaceX IPO, but you want in, what do you sell? You probably sell your existing tech positions. You don't sell your defensive positions. You certainly don't sell your house, but you sell all of your more speculative positions. Trim those down so that you can fund this new position. So yes, Virgin Galactic is down, AST SpaceMobile is down, Rocket Lab is down, and in the buildup to this IPO, we saw the same thing with many of the tech names. So I think, and this is exactly what we said, I think that when you have OpenAI going public as well, Anthropic going public, I mean, we'll see when they go public. It seems like they're going to go public very soon, perhaps around the same time. You're going to see the same dynamic. In order to fund that, in order to keep up with supply, as we said, this is econ 101. When there is more supply, that results in lower prices overall. When we see that massive injection of supply, suddenly investors are going to have to think, okay, how do I get in? I'll trim my position in Tesla. I'll trim my position in these tech companies. And that way, I can get into these stocks. So, that is exactly what we're seeing right now in the space market itself. You also mentioned the idea of different classes of shares here, which I think is very important, and it's especially important as it relates to Elon Musk, who will retain 82% of the voting power of this company, which is now one of the top 10 most valuable companies in the world. It's more valuable than Tesla. He owns 82% of the voting power. He picks the board. He cannot be fired by anyone other than himself. He has also required shareholders to unconditionally waive the right to jury trials and class action lawsuits because he has PTSD from being sued by Tesla shareholders. And of course, he is also incorporated in Texas. And as we've discussed on the show, the Texas Business Court is famously weak on protecting shareholders. It's very pro-founder. It's very pro-CEO. It's very pro-insiders. 82% of the voting power. I mean, maybe that makes you confident because you really trust Elon, but if you don't trust this guy, if you don't trust his judgment entirely, if you think that he's spending the majority of his time on ketamine or whatever you think, that's a terrible number to see. And I have noticed that some pension funds are opting out because of that number. What do you make of that from a governance perspective?
Well, so corporate governance is based on governance, and that is it's supposed to be one share, one vote, like one man, one vote, right? That's the idea that if you want to attach economic sacrifice or risk to authority. So ideally what you want in a company is that if 51% of the shares vote for a certain action, to fire the CEO or to sell the company or to put in place certain initiatives, that they, given that they've put 51% of their capital at risk, that they get 51% of the vote. Dual-class shareholder companies basically separate ownership from authority. And that is, and it initially was invented by owners of newspapers and media companies who said we're worried that a bad person's going to come in and use their economic power to buy a great media company and use it for their bad actor means. Google's founders were the first to demand a dual-class shareholder company and want to maintain control with a minority position, and it actually, the VCs pushed back, and ultimately Larry and Sergey won out, and that created a flood of new companies with dual-class shareholder structures. Everyone from the Sulzbergers own less than 1% of the New York Times and they control it. The Ford family owns, I think, single-digit percentage of Ford. They control Ford. I'm not as exercised by that because my sense is buyers, you know, need to do their own research, and there's a lot of companies that have a similar dual-class shareholder structure, and they know what they're getting into or they don't. But that's up to them. There's two sides of the street. If you don't want Elon in charge, don't buy the stock. What I'm more worried about, and I think is a bigger existential risk, is that we now have one man, and specifically this man, who has more wealth than any man in history by any ratio, and wealth in a capitalist society and in an after-work economy is just infinitely more powerful. So this is someone who can turn off and on battlefield technologies, and I've already said to you I think the fix is in. I think that my guess is Donald Trump has had many conversations or an open dialogue with Elon Musk, and Elon Musk is now, you know, okay, so he's a trillionaire, and say he leaned on Trump. I mean, first off, let's just talk about that wealth. That amount of wealth and power, I believe, results with Citizens United in an undue amount of political influence. And generally speaking, for example, most elections are kind of, you know, 49-51 or 47-53. And when you have someone who basically might say, 'Hey, Donald, you know, put pressure on your SEC chair to waive all these stupid rules.' In exchange, you know, I'm now a trillionaire. I put 250 million to work in your campaign and had an influence. What if I put 10 billion to work now? 1% of my net worth. And so I think it's just a very... I think power corrupts, and absolute power absolutely corrupts. Also, I don't think Elon Musk has acquitted himself well in terms of judgment. So I think we're in a... that dual-class shareholder poor governance, that doesn't freak me out. People can decide to sell the stock. What freaks me out is having someone who doesn't live with other people as far as I know, is estranged from, you know, one or more of his children, and has got a substance abuse issue, and sleeps with a loaded gun next to his bed, and believes there's a white genocide taking place in South Africa, is now the most powerful person to ever exist on the planet. And just to wrap up this word salad, I've now gone to where Gary Stevenson, you know, of Gary's Economics is, and that is he reframed my view of taxes in the sense that he said taxes are our protection from corruption. They're our protection from people aggregating too much power. And as I sit here in Stockholm where there's higher tax rates, we have this false argument in the United States that democracy and socialism can't coexist. And that's the wrong argument. What they've settled here in Sweden, as I walk around and see GDP growth of 2% and no homeless people and really great education, is that you can have billionaires and universal child care. And so this notion that it's one or the other, that you have to put up with homeless people and weirdness and corruption. Sweden has produced Spotify, Klarna, King, Ericsson. They have a GDP of $75,000 per individual with a population of North Carolina and a deficit that is 30% of GDP versus ours at 130. And I think that what I'll call the billionaire class has created this argument that no, you can't have economic growth unless you have this incredibly low taxation rate. And obviously I'm a little bit fond of Sweden right now because it's a summer day in Stockholm, but I think this country and other places say that that is just a [__] argument from people who want to aggregate way too much [__] power. So dual-class shareholder company, I'm not worried about it. One man with this much power, I think that's a risk.
Yeah. But it says something about his priorities despite the fact that he is the richest man in the world, the richest man in America, the richest man in American history, and if we want to start figuring out is he the richest man to ever exist on a relative basis, I'm not sure exactly, but I know for certain that that is true of the history of America where he's worth 3.2% of US GDP and the next richest in history was John D. Rockefeller who was worth less than half of that on a relative basis. But he still needs that power. He still needs to have more than 80% of the voting power of this company. And it's just striking the sense in which it is actually never enough for him. He has to continue to accumulate more and more wealth, more and more power. And anytime that there are any norms placed on him, this is what usually happens. This is usually how voting power is divvied up when you go public. He has to reject them. He says, 'No, I'm not doing it unless I have total control over the entire thing.' And let's just, I mean, a trillion dollars, we should just like put that into perspective, and because we're only a week away from normalizing that. You know, I've been seeing people on Twitter, mostly Twitter, but people on social media basically getting excited for him that he's now a trillionaire. Like he posted some meme about how he's now a trillionaire. And I see a lot of people retweeting it and being like, 'Let's go Elon. Like, he crushed it.' Which is such a strange... I don't understand it, but it's some strange blend of like sycophancy with this belief that you too will eventually become a trillionaire, or he's kind of sticking it to the man in some way even though he is now the man because he is literally worth a trillion dollars. I don't really know what the psychology is, but I know that we're about to normalize it. Just want to put this into perspective. This makes Elon, now that this company's gone public, richer than the bottom 46% of the entire world population combined. So, he has more wealth than 3.8 billion people and the southern hemisphere.
