Market IPO launchpad can accomodate 5 SpaceXes

Space Exploration Technologies

Today 18:59

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Stephen Gandel

    NEW YORK, June 17 (Reuters Breakingviews) - The successful $75 billion float of SpaceX SPCX.O, and the subsequent pop in the value of Elon Musk’s company, has started the countdown for Anthropic and OpenAI going public. It’s also raising concerns of an overload. Back in 1999, at the height of the dot.com era when Pets.com caught the public imagination, proceeds raised by listings peaked at $65 billion. Pandemic-era darlings like Zoom Communications ZM.O and Peloton Interactive PTON.O set a new record in 2021 of $119 billion. This year’s AI-fueled trio would probably blow past that sum. Yet today’s markets are vastly bigger than when the ill-fated online pet store floated or companies built on social distancing thrived.
So-called market capacity, or how much cash is chasing new equity issuance versus bonds or other investments, has long been a concern of IPO bankers. The SpaceX reception, however, suggests considerably more room for companies going public. Despite a sky-high valuation of over 100 times trailing revenue, the offering hit its target price of $135. Shares closed some 40% higher on Tuesday.
Part of this warm reception stems from the company’s promise. SpaceX's stated total addressable market of nearly $30 trillion drew guffaws, but orbital businesses and AI probably will grow substantially. But bankers also said pools of capital looking to invest, from U.S. family offices to Asian private wealth to sovereign wealth funds, were much larger than expected.
The size of equity markets today also matters. Consider that in 1993, total new IPOs raised $31 billion, according to Jay Ritter of the University of Florida. Yet total U.S. market capitalization then was $5 trillion, judging by World Bank data, so new companies – ignoring blank-check acquisition vehicles or securities representing foreign firms – drummed up less than 1% of this total. The total value of all stocks had risen to $69 trillion at the end of last year. Adjust for this over 13-fold expansion, and a similarly sized IPO haul would top at $413 billion, or five times the size of SpaceX’s initial offering, excluding a slug of extra shares that were available to underwriters.
That doesn't mean the window for new issues will stay open, or guarantee companies will fly through it. If the stock market craters for whatever reason, public floats would dry up. But at least by the standards of past booms, the market should have no problem digesting Anthropic and OpenAI with some room left over.
     
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CONTEXT NEWS
     Shares of SpaceX rose in their first two days of trading following the completion of its $75 billion initial public offering on July 11. The closing price on June 16 was over 40% higher than their initial price of $135 per share. 
AI-leaders Anthropic and OpenAI have both filed IPO documents confidentially with the SEC, according to Reuters. But neither company has set an official timeline for the deals.

(Editing by Robert Cyran; Production by Maya Nandhini)
((For previous columns by the author, Reuters customers can click on GANDEL/ stephen.gandel@thomsonreuters.com))