The Physics of SpaceX

Blind Squirrel Macro paid subscriptions are paused until early June. I am unable to accept new paid subscribers until then. This is a special free edition. In addition, I have removed the paywall on SpaceX material from earlier this year (links at the bottom of the note). Please share this public service announcement far and wide!The ‘Start the Week’ note will be out for existing paid subscribers on Sunday night or Monday morning EST. Please get in touch if you recently subscribed to my work and are interested in a trial / review of the archive.The Physics of SpaceXWell, the SpaceX S-1 finally dropped this week. As you know, the 🐿️ (together with podcasting partner Benny) have been following this one very closely. Even if you (like this rodent) have no intention of placing an order in the IPO, all investors and traders have no choice but to pay attention to the circus.The latest ‘price talk’ for the deal is that SpaceX is expecting to raise $75bn at a valuation of $1.75trn (more on that later) in mid June. Including the 15% greenshoe, the company’s underwriters will need to place $86.25bn worth of stock. There is no (even vaguely close) historical precedent to such a raise, and I think it will place a huge test on the stability of the US equity market.But right now the ducks are quacking - Polymarket odds are pricing a 74% probability of an end of listing day market capitalization for SpaceX in excess of $2trn. And if the SpaceX common stock is insufficiently racy for you, the ETF Sponsor community has already filed some completely degenerate alternatives for you. I imagine that listed weekly options will be also on the menu within days of listing.Once you have browsed through the glossy rocket photos and voluminous risk factors of the SpaceX S-1, you soon stumble upon the document’s ‘money shot’ - almost 80% of SpaceX’s TAM has nothing to do with rockets or satellite broadband subscriptions! Most of “the largest total addressable market in human history” is AI Enterprise Applications. The largest estimates of AI Enterprise Applications 2030 TAMs that I have been able to find online range from $50-300 billion. I guess that the inclusion of Mars more than makes up for the exclusion of China and Russia…Has everyone lost their minds?Close your Eyes and EarsYou are currently being submitted to a continuous barrage of propaganda. You must tune out CNBC BubbleVision (“Rockets!, Mars!, wow!”)! SpaceX has also co-opted the entirety of Wall Street. The assembled syndicate below is probably looking at a fee pool of $850m, assuming a (well below market and yet to be confirmed) underwriting commission of 1%. That number buys a ton of cheerleading (top tip - keep an eye out on Jefferies - they have a highly-ranked and now un-gagged Aerospace & Defense analyst and were not included as an underwriter). Next, please please please ignore these 👇clowns - I have engaged (🙏 Jason) a full-time stunt double to listen to (and summarize the b******t contained therein) the insufferable All-In podcast each week.The Silicon Valley and Midtown Manhattan ‘bros’ are already very very very long SpaceX. Their (extremely vocal) participation in the IPO will be performative only - aka a modest ‘averaging up’ of the basis of their existing exposure.Bottom line: if you are considering buying stock at a $1.75 trillion valuation, you have absolutely no business listening to the ‘objective’ 😉 cheerleading of those that bought in at less than 10% of that number. Fade the noise! I implore you.Below sets out the abbreviated SpaceX fundraising history. Elementary grade math will tell you that the basis of majority of the SpaceX cap table is in the trade at less than 5% of the current ‘price talk’ valuation. These investors - who have collectively put in less than $11bn of equity (versus $2trn of proposed market cap) into SpaceX - will be all over the TV and podcast circuit over the next few weeks encouraging you to embrace their bags.Even if these insiders tell you that they are ‘topping up’ their position in the IPO (and they will be very vocal), I would humbly suggest that you fade them hard!</p