Fundstrat Global Advisors head of research Tom Lee believes that the SpaceX (SPCX) initial public offering (IPO) will not mark the market top.
The News
In a new CNBC interview, Lee says the SpaceX IPO is a two-part offering, totaling a mind-boggling $1.775 trillion.
According to Lee, investors have scar tissue from the dot-com bubble, many believing that history will repeat itself.
“There’s the IPO, and it’s going to be $75 billion. The second part is the unlocking of the $1.7 trillion of shares that are held by private investors, many of whom have made generational wealth by being seed investors. That unlocks six months later. Now, many people are going to look back to 1999 and say, ‘Hey, when that unlock happened, then the market topped because now you’re releasing massive supply.'”
But Lee believes that SpaceX, Anthropic and OpenAI will steadily release positive information while keeping stock prices attractive in an effort not to alienate the public market.
“One reason I think it’s going to be less of a sell-everything after the lockup expiration is that these AI companies, including SpaceX, aren’t fully funded. So they are going to try to maintain a cadence of information and a relationship with public markets to make sure they can access capital markets for the next five years.
So I think that’s why I’m not as bearish about these sizable IPOs and the subsequent lockup, which is six months later. So if someone’s trying to call the top, they should be thinking six months out. But again, I’m not that bearish about that.”
What It Means for Investors
SpaceX is expected to debut in the public markets today, and if the $1.7 trillion unlock happens six months from now, it means that early SPCX investors will likely sell in Q4 of a midterm election year. Data shows that Q4s of midterm election years have been historically bullish.
National Bank Financial tracked the average annual performance for the S&P 500 in the past ~45 years (1980 – 2026). Midterm election years are shown in dark blue while all other years are depicted in grey.
The chart suggests that during Q4s of midterm election years, the S&P 500 has historically staged “Santa Claus” rallies after receiving certainty from election results.
The Bear Case
Historical data is not a guarantee of future results, which is why it is important to account for risks that could derail the market. Iran has just announced that the Strait of Hormuz is closed to all vessels following the latest US strikes on the nation. About 20% of the global oil supply passes through the Strait of Hormuz.
According to the independent research firm Evercore ISI, higher oil prices are an underappreciated risk factor that could drive equities lower.
Meanwhile, JPMorgan CEO Jamie Dimon warned that inflation could easily reach 4% later this year, which could translate to higher bond yields and add pressure on the stock market.
The Investor Takeaway
Many analysts believe that the equity bull market is intact, but investors should always be prepared for the unexpected. While Tom Lee believes that SpaceX offers investors the opportunity to get exposure to Elon Musk and all of his visions, it is possible that the weight of the incoming supply could overwhelm buyers in the event of bad news.
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