SpaceX IPO in 2 Days Divides Investors: $30 Trillion Future or Risky Bet?

Could Money Leaving the Kospi Be Headed for SpaceX?

With SpaceX’s initial public offering just two days away, the deal is emerging as a major variable for global capital markets. Investors worldwide are raising cash ahead of a listing that would value the company at $1.75 trillion, stoking concern that foreign funds could keep flowing out of South Korean equities and deepen market volatility. Securities firms say the SpaceX deal could act as a “black hole” for global liquidity and weigh on Kospi trading flows.

According to the investment industry on June 10, SpaceX is set to finalize its offering price on June 11 and begin trading on the Nasdaq the following day. The proposed offering price is $135 a share, with a fundraising target of $75 billion. If the planned issuance of 555.6 million new shares is completed, the company’s post-listing valuation would reach $1.75 trillion. That would surpass Saudi Aramco’s 2019 deal as the largest IPO on record.

The Globe and Mail reported that billionaire investor Ron Baron believes SpaceX’s future value could climb as high as $30 trillion. Baron, chief executive officer of mutual fund manager Baron Capital and an early SpaceX investor, expects Starlink to top 300 million subscribers and generate $1 trillion in revenue.

Joel Shulman, chief investment officer at ERShares, was similarly upbeat in an interview with Business Insider. He said it was “100%” certain the stock would begin trading at a premium to the IPO price. It also would not surprise him if some fund managers were raising cash to buy SpaceX.

South Korean brokerage analysts have reached similar conclusions. In a recent report, Lee Kyung-min of Daishin Securities wrote that the listing could become a black hole for global liquidity as it approaches. He said that could accelerate money leaving the Kospi, which has outperformed global equity markets. Lee also noted that $570 million has flowed out of South Korean exchange-traded funds over the past five weeks. Demand for cash ahead of SpaceX subscriptions may have contributed to those withdrawals from Korean ETFs.

Foreign investors’ selling streak is also drawing attention. Overseas investors have been net sellers on the benchmark KOSPI for 22 straight trading sessions since May 7, unloading a combined 70.5 trillion won through the previous day. The index, which had been nearing the 9,000 mark, tumbled 8.28% on June 8 to 7,484.41 amid the foreign selling. Lee wrote that the unprecedented size of the deal could absorb cash waiting on the sidelines during the IPO process. If SpaceX is added to major indexes after listing, he said, passive fund rebalancing could also create fresh selling pressure on existing stocks.

Samsung Securities said it also could not rule out the possibility that some investors raised cash ahead of the SpaceX IPO by taking profits in leading stocks in South Korea and overseas markets. Kim Jong-min, an analyst at the firm, said the record-sized deal could disrupt stock supply and demand in the domestic market in the short term. Through the end of June, he said, South Korea’s leading sectors may be forced to pause while index volatility widens during what he called a liquidity black-hole period.

Some market watchers are also warning that buying SpaceX could amount to a dangerous bet. Investor Keith Fitz-Gerald said individual investors would almost certainly regret jumping into a mega-IPO like this and warned the shares could drop 20% to 40% in the short term. Robert Johnson, a professor at Creighton University, said the stock may soar, but the investment is too risky and should be avoided.

Steve Eisman, known as one of the real-life figures behind “The Big Short,” also expressed concern after reviewing SpaceX’s prospectus. He told CNBC that the company’s spending on facilities and infrastructure in the first quarter had surged to more than twice its revenue. SpaceX is pouring money into investment far faster than it is bringing in sales, he said.

Stephanie Link, chief investment strategist at Hightower Advisors, also highlighted the risks. SpaceX cannot be valued through a traditional lens, she said. Investors should put only a small amount into the stock, no more than 2% of their total portfolio, and then forget about it.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com