Friday’s historic SpaceX IPO, which will make Elon Musk the world’s first trillionaire, could drain liquidity out of markets, causing fresh volatility, and hitting investor portfolios, the CEO of leading financial advisory deVere Group has warned.
SpaceX begins trading following the largest initial public offering ever undertaken, raising $75 bln and instantly becoming one of the most influential stocks on Wall Street.
“This is a watershed moment for world markets,” said Nigel Green, explaining that, “SpaceX is pulling in an extraordinary amount of capital and investors everywhere need to understand the consequences.”
He warned that money is about to be sucked towards one company “on a scale we’ve never seen before.”
“Capital has to come from somewhere. Funds will be sold, positions will be cut, and portfolios will be reshaped,” he added.
“Investors are focused on the excitement. Far fewer are talking about the liquidity vacuum that can emerge around a deal of this magnitude.”
The deVere CEO noted that the offering arrives amid an unprecedented race to finance AI and advanced tech projects.
“SpaceX is landing on a market already stretched by huge capital demands from AI and tech giants.
“Hundreds of billions of dollars are being chased by a relatively small group of companies. Every dollar committed to a new issue is a dollar that isn’t supporting an existing holding.”
Green said the impact could reach far beyond the tech sector, with “the potential to trigger a meaningful rotation across markets.
“We could see investors selling yesterday’s winners to fund tomorrow’s opportunity. This can happen quickly and it can be brutal.”
“Many investors have become accustomed to a market that keeps climbing. A transaction of this size can disrupt that rhythm.”
Green believes the risks are being underestimated because of the enthusiasm surrounding Elon Musk.
Market gravity still exists
“Musk has become the defining entrepreneur of his generation. His ability to attract capital is unmatched. But market gravity still exists.”
Investor demand for the IPO has reportedly exceeded $250 bln, highlighting the extraordinary appetite for the shares.
The deVere CEO said that the level of demand, “is staggering, but investors should be careful not to confuse popularity with certainty. Crowded trades can become volatile trades very quickly.
“History is full of examples where investors rushed into landmark IPOs believing the only direction was up. Markets rarely reward that kind of complacency.”
He warned retail investors not to get swept up by the hype.
“There’s a tendency to assume that because a company has been a phenomenal private-market success, the public-market journey will be equally smooth. Reality is often far messier.”
“FOMO [fear of missing out] has emptied more wallets than almost any market correction.”
Green stressed that the long-term outlook for innovation remains compelling, but said discipline is essential.
He concluded that this IPO could become the defining market event of the decade.
“It will create winners and losers. It’ll move capital around the world at breathtaking speed. The danger for investors is getting caught up in the spectacle and forgetting the fundamentals.
“SpaceX may be heading for the stars, but investors still need to keep their feet firmly on the ground.”
