Elon Musk’s rocket company, SpaceX, is gearing up for its highly-anticipated initial public offering (IPO) on New York boards this Friday (Saturday AEST), attracting interest from various Australian development funds. While many competitors are looking at the opportunity, funds such as Monroe Partners and Plato Investment Management are making early investments. SpaceX, a company founded by Elon Musk, designs and manufactures advanced rockets and spacecraft, provides launch services for commercial and government missions, and aims to facilitate human space exploration. The company recently reported a net loss of US$4.9 billion last year, despite revenue growing 33% to US$18.6 billion, and has never been profitable.
Nick Griffin, chief investment officer of $9.1 billion Monroe Partners, confirmed a small investment in SpaceX, valuing it at US$2.57 trillion. Griffin aims for some exposure when the stock rises after the debut, despite the price being “a little hard to stomach.” He expects better buying opportunities in the months to come, once internal lock-ups expire and private investors begin pulling out, a common occurrence after large IPOs. Plato Investment Management adopts a similar strategy, buying shares to build an index-weighted position. David Allen, who manages Plato’s Global Alpha Fund, highlighted the company’s 100 times price-to-earnings multiple, warning that such a valuation leaves little room for error.
In contrast, several fund managers, including Alex Pollak of Loftus Peak and Joseph Ziller of Ziller Funds Management, are holding back. Pollock, despite expecting an early rally, is the exception, noting that SpaceX doesn’t meet the S&P 500 index’s inclusion criteria like profitability. Ziller, bullish on the space industry’s attractive unit economics, cited high costs as a barrier. Hedge fund manager Jack Ho, who previously held a position, plans to sell shares earmarked for any new IPOs in the early days of trading, taking advantage of an expected surge of passive and benchmark-aware investors.
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