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Chapter 1: What is the main topic discussed in this episode?
The Clare Byrne Show on Newstalk. With Aviva Insurance.
And you're listening to Ciara Doherty on The Clare Burns Show this morning. Now, if all goes according to plan, Elon Musk will become the world's first trillionaire today. The initial public offering of his rocket, satellite and AI company SpaceX is the biggest in history. It's expected to raise more money in one day than the annual economic output of many nations.
A whole bunch of people in Musk's orbit are going to get very, very rich or even richer today. And millions of regular people are about to become SpaceX investors, even though they may not realise it. Well, joining us to discuss this now is Emmett Oliver, business correspondent. Emmett, lovely to speak to you.
So we've already had a sort of an initial offering here, about 75 billion of shares prior to this IPO. It was massively oversubscribed, which seems to suggest there's going to be real demand for this.
Chapter 2: What is the significance of SpaceX's IPO for Elon Musk?
Yes, good morning Ciara. Absolute mania is the only way to describe it and it's global. We know that Elon Musk has a very enthusiastic, almost cultish following from a lot of people in the US who like his Tesla cars for starters. But this has moved up another notch again. As you say, about 25% of these shares are going to be allocated to what they call ordinary retail investors. So that's
me and you and people sitting at their computers who trade just kind of casually if they have some extra money. Those people are going to be bundled into this and there's obviously a lot of enthusiasm. They're not doing it because they're being forced, those retail investors, but they're very enthusiastic about Elon Musk. But what he's selling, Ciara, is two particular things.
Data centres that are out in outer space. orbiting the Earth. So that's one particular business line that he's hoping can come true in the next few decades. And the second one is a reusable rocket called the Starship, the SpaceX Starship.
So this will be a rocket that will go off like an aircraft, a commercial aircraft will go around space delivering things possibly to Mars and possibly launching satellites as well, very heavy ones. And that will be reusable and obviously the people will pay to get use of that and it'll generate a lot of revenue as well. So these are the two things he's selling to these investors.
They're not going to pay off immediately. Some people say they may never pay off. But at the moment the company is loss making. It loses several billion dollars a year. So a lot of it's based on future investment. So you're taking a risk on future earnings.
Emma, do you have a sense that the share price here, which is $135, is in fact way overvalued, given so much of this technology hasn't actually been brought to full fruition yet?
No, I think you're investing in the dream, you know, that that is what you're essentially doing. And sometimes dreams pay off and sometimes they don't, you know, so that's the risk. There's a very influential note out this morning from a company called Morningstar, a big fund manager, saying, And they say the shares are valued at $63 per share, not $135 per share.
So that's the fundamental value of the company. But you're basically not investing in a company, Ciara. You're really investing in Elon Musk, the person. He controls 84% of the voting shares of the company. He effectively can't be fired. He doesn't really have a board of any kind in any independent sense.
So it really comes down to whether you think his visions that he's selling, which I've kind of outlined the two main pillars of those, whether you believe they will come off, whether they will pay off and how long it will take before they pay off. I mean, the idea of putting data centers into space is extraordinary. I mean, as you know, most data centers are huge.
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Chapter 3: How is the demand for SpaceX shares impacting investors?
Can you put those into space? What about cooling them down? I mean, data centers use the air. A lot of them are based in Ireland, of course, for our nice Atlantic air that cools them down. Can that be done in space? Again, can it be done efficiently? So there's massive amounts of questions here. But he has done it before. Tesla is an extraordinary company.
But equally, he has, you know, bad mistakes on his record too. You know, X, formerly known as Twitter, He's losing a pile of money. It was bought for $44 billion, but it's really a financial basket case. So he has had a lot of success, a lot of success, but equally his record is fairly mixed.
So it's whether you think you lean in either sense of that, whether he's got the Midas touch or there is a big problem here that will only come to really kind of be revealed in several decades.
Well, that's the whole thing, isn't it? I mean, who will take that risk, do you think? Who is going to be investing and buying these shares? And is there a possibility if this company gets as big as is predicted, that retirement plans, your pension plans, that people listening today might inadvertently find themselves as investors in SpaceX?
Yes, is the short answer. I mean, it is a very peculiar part of the story that this is a company that's planning to build a colony on Mars consisting of a million people living in a colony. You might say, oh, well, this is just things Musk says in an interview, but it's actually in the prospectus of the company that this is one of its plans.
Now, to be fair, it's kind of very much at the far end of what they're hoping to do, but it is listed and included there. So when it comes to who would be investing, you're absolutely right. A lot of investment now is done on a passive basis. And what that means is
people get put into shares that they don't select they don't have the old-fashioned model which is you know active investment where you can tell a money manager put me into this sector put me into that company there's a particular mandate they may have and you might say you know I don't want to be in that sector I don't want to be in that part of the market AI in particular a lot of people are nervous about it but however if your money is invested on what they call a passive basis it means it just gets put into an index
that you track. So it just tracks the Standard and Poor's Index or the Dow Jones or various exchange traded funds as they're known. So you won't have actually necessarily know that your individual money has gone into that individual stock of SpaceX. So yes, a lot of people listening, a lot of US investors in particular will be invested in this company and other AI related companies
even though they may not know it, or certainly when it comes and they get their statement at the end of the year, they may not bother to read through where exactly that money is going. But yes, it will be invested into SpaceX.
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Chapter 4: Why are retail investors excited about SpaceX's IPO?
Yes, 4,000, it's estimated, Ciara, which is really an extraordinary figure. Think about the Intel plant in Leeds. It was as if every single person of that plant was to become either a millionaire or a billionaire on the back of this. So the two areas where the money is going to go are Texas, where the company is headquartered.
The city of Austin is expected to see its net wealth considerably boosted. And another part of the company is based in California. So what we're hearing so far is what's everyone buying with their new money? People who joined this company years ago, well, it's the usual suspects, the Rolex watches. A lot of people are buying Ferraris. And the last thing people are buying is actual private jets.
So you've got people who were, you know, spent most of their life previously traveling on ordinary commercial civilian airlines buying
who now can walk in and get a gulfstream private jet on the back that's the kind of money that you're talking about now on the other end of it kira you have you know universities and you know they've got their endowments who are going to benefit they might have invested many years ago and a lot of pension funds got in at the early stages and all anyone who got in early on this obviously is going to do well our discussion today is more about what happens from this point onwards but absolutely you're correct a lot of the workers are going to become instant
paper millionaires and a few of them will become paper billionaires on the back of this where really they're going to have untold riches that they probably never envisaged when they joined what was effectively a start-up a good few years ago.
Well, it's going to be a pretty fancy car park I would imagine in SpaceX HQ over the next couple of weeks but it is certainly one to watch. Emmett Oliver, thanks so much for joining us.
The Clare Byrne Show.
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Chapter 5: What innovative technologies is SpaceX focusing on?
With Aviva Insurance. Weekday mornings at 9. On Newstalk. Conversation that counts.