“Bull markets put a premium on promises. Bear markets put a discount on reality. Right now we’re clearly in the former.” – Jim Chanos
Legendary short seller Jim Chanos took our talking points (see “The $2Tn Lie: How Elon Musk is About to Perform the Largest Wealth Extraction in Market History and Why You Should NOT be the Exit Liquidity“) to 2,500 Institutional Allocators at the iConnection Global Alts Conference in NYC yesterday, saying: “This is really a ‘hopes-and-dreams’ IPO.”
I’m very glad he did, because I was starting to think I was crazy after having my brain washed all day by the Financial Media, who are treating this $1.75Tn IPO like the second coming of Apple.
And I’m sorry to keep mentioning it but it is going to be the largest IPO in history, creating a $2 TRILLION company out of thin air – 90% based on BS promises of future promises and future revenues that have NO BASIS in reality at the moment. It’s too late, of course to save people – the IPO is 4x oversubscribed at $135 but maybe Chanos and I can stop people from chasing it to $185 ($2.4Tn!) before it settles down at $85 ($1.1Tn) after Q1 earnings drop and the lock-up period ends.
“The total addressable market for space is infinite,” Chano said. “You can build whatever stories you want — colonies on Mars, factories on the moon, data centers in space — to justify the valuation. Tesla trades at roughly 14 times Revenue based on promises of the future, SpaceX is coming at roughly 90 times revenues.”
As you can see, the S-1 Filing reads more like a Science Fiction Novel (a long, boring one) than an Investor Report. From a substance point of view, Musk and Company may as well have shown the audience Star Wars for their road show and said “THIS is what you’re investing in!”
Chanos discounts all of the Science Fiction projections and values SpaceX’s ACTUAL business (you know, the one that exists) at “A couple of hundred Billion Dollars” and dismisses claims that space-based data centers could become a transformative new market. While TECHNICALLY feasible, he said such projects face significant economic and operational hurdles, including launch costs, maintenance challenges, insurance requirements and the need for extensive redundancy (things I brought up in yesterday’s Webinar, where we spoke to one of SpaceX’s top investors).
Anyway, don’t say we didn’t warn you (over and over again, in fact) – now we’ll see how things play out.
Meanwhile, given that the IPO is over-subscribed and should do well, who will benefit from the company beginning to spend $75Bn worth of Other People’s Money?
Alcoa (AA) is one we mentioned in the Webinar and also on Bloomberg’s Money Talk last night, where we added the trade to our Money Talk Portfolio (see Tuesday’s review)
IN PROGRESS
