Why Elizabeth Warren is worried about SpaceX
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Good morning from the Financial Times. Today is Wednesday, June 17th. This is your FT News briefing. Investors are back in love with the U.S. dollar, and there are concerns that the Strait of Hormuz won't return to its old self anytime soon. Plus, a sneak peek of our interview with U.S. Senator Elizabeth Warren. She's got a lot to say about SpaceX.
This particular IPO has enough red flags on it that it should stop anyone in just thinking about it.
I'm Mark Filippino, and here's the news you need to start your day.
Investors are flocking back to the U.S. dollar. They're betting that the AI boom will keep the American economy strong and that the Federal Reserve will keep interest rates high. Wagers on a stronger dollar rose last week by the most since 2018. That took the green back to its highest level in more than a year. The currency began its rise with the start of the Iran war. Investors believe that the U.S. was able to handle a jump in oil prices better than other countries. And the dollars remained high despite news of a possible end to the conflict. Now, we could be seeing a stronger dollar for a while.
What concerns does Elizabeth Warren have about SpaceX's IPO?
The Federal Reserve is expected to keep interest rates steady during its first meeting with Kevin Warsh's chair. As far as interest rates go, the FT put out a poll this week. It found that a majority of leading economists say that the Fed will need to raise rates by at least a quarter point by the end of the year to combat inflation.
Last week, SpaceX's initial public offering was the largest in history. And on the morning we're recording this, Tuesday, it briefly passed Microsoft as the fourth largest company by market capitalization. All the while, Elon Musk, the owner of SpaceX, has become the world's first trillionaire, thanks to his shares in the AI to rockets business. But for some, the SpaceX listing and its blockbuster valuation is a reason to worry, not celebrate. In the run-up to the IPO, U.S. Democratic Senator Elizabeth Warren wrote to the head of the Securities and Exchange Commission asking the regulator to delay the listing. Warren is a ranking member of the Senate Banking Committee. She joins me now to talk about why she opposed the SpaceX IPO and what it tells us about the American economy.
Senator Warren, welcome. Thanks for having me. So let's start with the most recent updates. SpaceX has shot up in value by more than a trillion dollars within just several days of going public. That's from an initial valuation that was already the highest in history. What are your thoughts as you're watching this?
Look, I want Americans to have opportunities to invest in companies that help our economy grow. But the confidence of investors is a big reason why our markets are the envy of the world. And this particular IPO has enough red flags on it that it should stop anyone in just thinking about it. So look at it this way. First of all, the valuations. Elon Musk valued his company with numbers that analysts call nonsensical and out of this world. In part, he based it on the merger of SpaceX and XAI, which means, I guess, Elon Musk got in a room with Elon Musk and negotiated on how much the merger should be worth. Then, secondly, SpaceX... push the major index providers to change their rules to force SpaceX into index funds at record speed, which will artificially boost the stock price in the short run.
How is the US dollar being impacted by AI investments?
And then they've set it up so that insiders will have an opportunity to sell their shares into the market. And when they do, they will have this captive audience of the index funds. And then the third is that this IPO really undercuts shareholder protections that have been in place for a long time so that Elon Musk basically keeps all of the control for himself rather than the ordinary way. And that is, you know, if a CEO is running a company into the ground, shareholders can actually get rid of the CEO.
I'd like to drill down on one of those concerns in particular, and that's indexing. Sure. As you mentioned, this will affect a lot of people, whether they are interested in investing in SpaceX or not.
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