Fundstrat head of research Tom Lee believes that the upcoming SpaceX IPO will be a big lift for consumers who will likely face higher gas and food prices.
The News
In a new CNBC interview, Lee breaks down how American consumers will ultimately benefit from the wealth effect of the blockbuster IPOs coming this year, starting with Elon Musk’s SpaceX.
“If I had to say what are the things that are sort of ballast and things moving the consumer — of course we know that it’s higher gasoline, higher food, and of course there’s going to be a shortage of some petroleum products. But on the other end of that spectrum is the wealth that’s going to be created by the IPO of SpaceX. I mean that’s several trillion dollars worth. And as we know, there’s a marginal propensity to consume from the wealth effect. So I think the consumer is getting a tailwind later this year.”
Lee says that private investors will be the primary beneficiaries of SpaceX’s public listing, but he notes that the wealth will eventually trickle down as early investors lock in and spend gains.
“SpaceX was probably seeded at $50 million. It probably raised tens of billions over the last decade. But now it’s going to have a net worth valuation of around $1.7 trillion. So that’s actually now going to be monetized for the LPs (limited partners) of the funds that invested in SpaceX. Several trillion dollars is quite a lot of stimulus to the economy.”
What It Means for Investors and Consumers
Lee appears to be saying that retail investors will serve as exit liquidity for early SpaceX investors. At a $1.7 trillion valuation, early investors are likely up more than 100x from their initial bets.
For instance, Google bought a 7.5% stake in SpaceX in 2015 for $900 million. At current valuations, Google’s stake is worth $127.5 billion, a whopping 141.7x increase in 11 years. Other insititutional investors like Fidelity are also in the same boat, positioned to cash out and lock in enormous gains.
While the SpaceX IPO appears to be another case of the “rich get richer,” Lee’s saying that consumers will benefit from the wealth unlock. He believes that the gains will ultimately be stimulative to the economy as higher-income consumers splurge on vacations and premium goods, likely triggering a wave of job openings and higher wages in some sectors.
As for investors, the upcoming SpaceX IPO is offering an opportunity to own a stake in a company that seeks to put data centers in space. Billionaire Ron Baron predicted that SpaceX could be worth $10 to $30 trillion in the next 10 to 15 years as the company leverages its reusable rockets to send solar-powered AI satellites into space.
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