New Zealand investors among those losing money in SpaceX price slump

SpaceX's share price slump is a reminder to New Zealand investors of the hype that can circle a new listing, commentators say.

The price of shares has fallen from a peak of more than US$200 to around US$135 and has at times dipped below that IPO price.

The drop has cut the company's value by nearly US$1 trillion, and cost founder Elon Musk his US trillionaire status.

Many New Zealanders will have been affected by the share price movements - Sharesies said SpaceX had generated very strong interest with its IPO and trading in the shares since.

"We were pleased with the allocation that we were able to get for our investors who applied," co-chief executive Leighton Roberts said mid last month. "It has also been a popular choice over the last couple of days on the secondary market."

AUT professor of finance Aaron Gilbert said SpaceX was a good example of a company that tended to attract a lot of hype.

"It has an exciting story, enormous potential, and a wide divergence in opinion, with many investors extremely optimistic about its future. Add to that the fact that only around 5 percent of the company's shares are publicly traded, and it is relatively easy for those optimistic investors to have a strong influence on the initial share price. Over time, however, the shareholder base broadens and investors with more cautious views begin to have a greater influence on pricing, so it is not unusual to see some of that initial enthusiasm unwind."

He said share prices ultimately reflected information and expectations about the future.

"At around $200 per share, investors needed a great deal of SpaceX's future potential to become reality-Starship to be commercially successful, Starlink to become the dominant global satellite internet platform, and newer ventures such as floating AI data centres to generate substantial profits.

"At the same time, the economic backdrop is becoming less favourable, with the possibility of higher interest rates increasing investors' required returns. Because so much of SpaceX's value depends on cash flows that are many years into the future, even relatively small changes in expectations about growth, profitability or interest rates can have a large impact on today's share price.

"The result is that SpaceX is likely to remain a volatile investment. Small pieces of positive or negative news can produce outsized share price movements because investors are continually reassessing a business whose value depends much more on what it might become than on what it earns today. It is also worth remembering that, even after the recent pullback, SpaceX is not obviously a cheap stock. Investors make money by buying businesses for less than they are ultimately worth, and companies that already trade on very high valuation multiples - whether measured by price-to-sales or other metrics-leave much less room for disappointment."

Forsyth Barr senior equities analyst Aaron Ibbotson said AI "hype" in general had weakened. "SpaceX is one of those proper FOMO stocks, and if there is no missing out, then the fear subsides. Proper momentum stock. It goes up because it goes up and then down because it goes down. Stocks with limited connection to fundamentals move on sentiment."

Kernel founder Dean Anderson said it was common to see excitement about IPOs that then waned.

"I think it's a common trait of a lot of IPOs… where the IPO process involves suspense and the build-up to the moment and there's a lot of sales activity going on. We saw that with SpaceX, where everybody wanted a piece of this thing. There was a lot of curiosity around is it going to be included in the indices? What does that mean? And there was a relatively small portion of capital being raised so the expectation was that there's a bit of a fight over who's going to get a share of that small amount of equity that becomes available."

He said there had been concerns about the "fairly lofty" valuation that was based on long-term, ambitious assumptions for the company.

"It doesn't mean it won't achieve them over the long term but a lot of that is already baked into the assumption at the price that it came to market."

Anderson said it was so easy for everyday investors to buy shares in the US market now that it drove prices up.

"As that initial buying activity eases, people have effectively done their shopping and what we're seeing is the price starting to come back down."

He said it was now included in the indices that were going to pick it up straight away and the S&P would not add it for 12 months or more, so that would not provide additional buying support for a while.

"The next big moment is going to be when it releases its first set of quarterly reports. For now there's no new information available. People are going to be having a close eye on how well is Starlink going? What does the pathway look like for X? How much is being spent on AI infrastructure? I think we need to wait and see until that next set of reporting comes through in terms of is it on track or maybe it's got some headwinds."

He said it would also be interesting to look back in 12 or 18 months' time to see whether it was worthwhile holding SpaceX early or whether holding off proved the better plan.

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