- SpaceX stock price jumped by 19% after the much-anticipated IPO.
- Jim Chanos is warning about the company and its lofty valuation.
- Other analysts are warning that the stock may crash soon.
SpaceX stock price jumped by nearly 20% after its much-anticipated initial public offering, which pushed its valuation to over $2 trillion. It has now become the 7th biggest company in the world after Nvidia, Alphabet, Apple, Microsoft, Amazon, and TSMC. Still, despite the surge, one analyst is warning of an imminent crash.
Jim Chanos Warns of SpaceX Stock
In a Bloomberg interview, Jim Chanos, a veteran short seller who warned of Enron, sent a blistering warning to investors. He warned that the IPO and the company’s valuation reminded him of the Enron era.
For starters, Enron was one of the biggest energy trading companies in the United States. It collapsed in early 2000s after it was caught engaging in accounting manipulation. Chanos was one of the top short sellers who warned of the company’s risks.
Chanos identified two main risks. First, he believes that the company will ultimately engage in massive equity raises, which may lead to dilution among investors.
Second, there are concerns about the company’s valuation. Its recently released earnings showed that the company made over $18 billion in revenue last year, while losing nearly $5 billion. These losses came mostly from the xAI part of the business, which is burning substantial sums of money.
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In contrast, Broadcom, which is valued at $1.8 trillion, made $63 billion in revenue last year, and analysts expect that it will make $106 billion and $170 billion this year and in 2027.
Similarly, Taiwan Semiconductor, which is valued at the same level as SpaceX, is expected to make $175 billion and $221 billion in the next two years. TSMC has a net profit margin of 45%.
Jim Chanos is not the only one warning on the SpaceX stock. In an interview, Nick Colas, the co-founder of Data Take Research, warned that the simple math don’t add up to any rational measures of value. He warned that the IPO calculus was simply based on math.
Bradley Tusk, another top analyst, believes that it would be crazy to buy shares, pointing to the lofty valuation.
Still, some analysts believe that the company is a bargain, pointing to its large addressable markets. For example, its space solutions has a TAM of $370 billion, while starlink broadband, mobile, AI infrastructure, consumer subscriptions, digital advertising, and enterprise applications are worth over $23 trillion.
Most IPOs Pop and then Crash
The other main risk facing the SpaceX stock price is that many IPOs tend to jump and then crash after that. Indeed, data shows that 91% of them follow this script.
In SpaceX’s case, the 19% jump was not all that big. For example, Cerebras, a top chipmaker, its stock nearly doubled on day one. Today, it has crashed by over 50%. Similarly, Circle stock more than doubled on day one, and today, it remains much lower than its peak.
Just look at all of the recent IPOs, including companies like Figma, Medline, Wealthfront, Venture Global. Chime Financial, and Klarna.
Therefore, while SpaceX is a good company, the most likely scenario is where it crashes in the coming months, and then starts to rebound later once it demonstrates revenue growth and profitability.
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