How Elon Hijacked the Stock Market
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, we’re talking about:
How Elon Hijacked the Stock Market
We are a mere week from the most anticipated IPO in financial entertainment.
I know I was just on here two weeks ago yammering about the financials of the company.
Aaaaaaaaaaaand they are bad. I know they’re bad. Wall Street knows they’re bad. Elon knows they’re bad.
But none of that matters.
Elon and the anti-investor cretins at the Nasdaq have it structured for this thing to run for the first two weeks.
This is…
How Elon Hijacked the Stock Market
“But Dave, you handsome devil,” you say. “What do I care? It’s a FREE MARKET. If people don’t want to buy this ridiculously overvalued, cash-incinerating machine, they can just not buy it.”
“If institutions think Elon Musk is a pompous ass who constantly lies through his hypocritical, dumbass teeth—like how he says he wasn’t on Epstein's island—they can just not buy it.”
That is where you are wrong, brother.
Not about Elon being a scumbag. That is purely an opinion, but 100% true. Guy sucks.
But you are wrong in saying institutions can just not buy SpaceX.
They have to buy it.
And they have to buy a lot of it.
It comes down to how the “public” stock market works. I put “public” in quotes because it is looking like a few private individuals are setting a lot of the rules lately.
Kinda like how Elon just waltzed into the White House last year, was given full access to everything, and miserably failed to get anywhere close to balancing the budget.
I sure trust this guy’s projections.
You may have heard that SPCX has got a big asking price.
Elon’s rocket company is going to be available for public trading on Friday, June 12th, at the eye-watering starting valuation of $1.75 trillion.
That would make it one of the top ten biggest companies in the world.
To put that in perspective, it is 12 times the size of UBER, despite Uber having nearly triple the revenue and similar quarterly growth rates.
EXTREMELY STRATEGICALLY:
The cash-sucking space stock is listing on the Nasdaq Stock Exchange.
Why go there?
Why not list on the New York Stock Exchange?
More prestigious, is it not?
Well, it all comes down to index funds.
You may have heard the sage advice from the likes of Warren Buffett or your wise Uncle Melvin:
Passively Invest. Just buy index funds.
This is a great strategy.
You just buy one fund, and it automatically diversifies you across hundreds of stocks…
indexed…
by their size.
Take a look at what you get when you buy one share of an S&P 500 index fund:
Index fund investing is so amazing and effective that it is incredibly popular.
There are trillions of dollars invested into funds that index stocks by their size. Here are the top five funds ranked by dollars invested, or AUM (assets under management):
Three of the top five are S&P 500 index funds.
The fourth is a total market index fund.
And rounding it out at number five, with a juicy $491B invested, is QQQ. That is the Nasdaq-100 index. This is the prime target of Elon’s new wealth-building machine that lost over $4.9B last year: SpaceX.
QQQ tracks the top 100 stocks on the Nasdaq based on their size. You get the biggest piece of the biggest company and the smallest piece of the smallest company. It currently looks like this:
If a new company comes along and leaps into the top, then all that money in QQQ needs to be rebalanced for the new allocation. So, half a trillion dollars will need to be reconfigured by selling the likes of NVDA, AAPL, MSFT, AMZN, and GOOG and their combined 2025 net income of about $544B.
And that money will go to buying SPCX and its 2025 net loss of $5B.
So Elon is sticking his bloated, overvalued, money-losing company on the public stock market at a crazy valuation, and as long as it doesn’t crash 90%, billions of dollars in index funds will be legally forced to buy it.
Doesn’t the Nasdaq have guardrails to avoid this sort of thing?
Yes. Well, they did…
Until May of this year when the Nasdaq changed them specifically to accommodate Elon and SpaceX.
You used to have to wait 3 months to a year before being included on the index. They changed it to 15 days.
You used to have to have 10% of the shares ACTUALLY AVAILABLE TO THE PUBLIC. Now, there is no minimum.
Hey Gemini, why is it important to have at least 10% of a “public” company’s float ACTUALLY AVAILABLE TO THE PUBLIC?
Well said.
Keep in mind, this company, which will be listing bigger than the likes of Walmart, ExxonMobil, or Visa, isn’t even profitable.
Hey Gemini, a company doesn’t even need to actually make money to crack into the Nasdaq-100?
Hey Gemini, is it possible SPCX debuts so poorly it won't make the index?
As much as the Musk children and I would love to see a historically catastrophic collapse in Elon’s face, there is virtually no chance.
So to sum it all up:
SPCX will be available to the public to trade on Friday, June 12th.
Institutions with the highly popular Nasdaq-100 index funds will be legally required to buy a projected $6B of SPCX from 3:50 p.m. to 4:00 p.m. on Thursday, July 2nd.
If we know all this, hey Gemini, gimme some stock predictions:
Translation: If you’re trying to dance with the devil and buy the SPCX IPO, you better get the hell out by Independence Day.
Final Thought
Take it away Gemini:
Jack Bogle is rolling in his grave.
