Andreas Cervenka on Elon Musk and the SpaceX IPO
Andreas Cervenka is my favourite economy journalist. He's written books. I've written about his Greedy Sweden. Another one of his books is named 'What does a bank do?' (my translation of the original title in Swedish).
That's actually a great example of Cervenka's greatness. Just like Noam Chomsky, Cervenka is brilliant at simply explaining complex and complicated subjects.
For example, he taught me that if I get a hold of 25 million USD, I can get a license to start my own bank. Once I do that in Sweden, I can start creating my own money.
Yes, you read that correctly.
You can create your own money. And that's not only how banks work in Sweden. The basic scheme is the same all over the world.
But that's not the only way to make money.
Cervenka recently had an article published in Aftonbladet magazine: Är SpaceX peak crazy?. In short, I think most of the article spells two things:
- How money easily is valued in very illusory ways
- The coming burst of the AI bubble will make the global financial crisis of 2008 to seem like a case of the sniffles (in some ways)
OK, here come quotes, translated by yours truly:
Friday afternoon, Swedish time, the space company SpaceX makes its debut on the Nasdaq stock exchange in New York.
It is one of the most hyped listings ever and by far the largest.
In total, SpaceX is selling new shares for 75 billion dollars, 712 billion Swedish kronor. The second largest listing was when Saudi Arabia's state-owned oil company Saudi Aramco went public in 2019. That time, the company raised 29 billion dollars.
Investing in stocks should normally be something that is primarily done with a calculator in hand. But anyone buying shares in SpaceX must, above all, use their imagination.
The price of 135 dollars per share means that SpaceX's market value lands at 1,770 billion dollars (just under 17,000 billion kronor) or almost 95 times last year's revenue.
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As recently as March 2020, SpaceX was valued at 34 billion dollars. The growth in value since then makes the company's own rockets look like moisture-damaged firecrackers.
It is also a valuation that defies gravity. Recently, AI competitor Alphabet raised a total of 85 billion dollars from investors through a new share issue, a record for a company already on the stock exchange.
Alphabet is valued at around ten times its sales.
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But then again, selling dreams is also something of Elon Musk's superpower. It has been a long time since the valuation of Tesla, with a market cap of 11,000 billion, was about cars. It is based almost entirely on Elon Musk's promises of robots and self-driving taxis.
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Even those who do not believe in the visions will be involuntarily drawn into the dream, as SpaceX becomes large enough to end up in the portfolios of all funds and pension managers around the world that track indexes. Millions of people will thereby become shareholders in the company.
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The question, of course, is what happens next. Just in the last few days, there has been more nervousness around AI stocks. Companies are worrying about the high costs of letting their employees use AI without restrictions. There have also been several studies suggesting that AI investments have not yet generated as much new revenue as expected.
And the Wall Street Journal reported on Thursday that OpenAI plans to lower its price to compete with Anthropic. Price wars are usually not very good for profitability.
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Perhaps all the visions will come true and SpaceX will be the starting point for a new era of humanity.
But it could very well turn out that we look back on 2025 and 2026 as a crazy time when many lost their footing. Something to laugh harshly at in hindsight.
“Do you remember the SpaceX prospectus? Elon Musk was going to get a 1,200 billion bonus if he put a million people on Mars”.