The Biggest Bagholder Operation In History - Part 2

Below are some of the most interesting things I came across this week.

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A few months ago, I highlighted a piece that argued SpaceX (SPCX) looked to be the “the biggest bagholder operation in history.” Since then, we have really seen no evidence to suggest otherwise. Shares have fallen over 50% since being hastily added to the Nasdaq 100 Index.

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Still, shares trade at a much higher (price-to-sales) valuation than Elon Musk’s other, longer-tenured public offering which is itself very highly-valued. “Tesla (TSLA) doesn’t sell more cars than any other automaker. It isn’t more profitable than the competition, either. But investors continue to give it a market capitalization equal to the combined value of the next 37 largest automakers,” reports The Wall Street Journal.

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Perhaps this is why the bag holder operation is really only just getting underway. As Bloomberg reports, “SpaceX has set the stage for one of the largest share unlocks in history, with as much as $116 billion worth of stock becoming eligible for sale by insiders for the first time on August 6. That’s just the start with billions of shares unlocking by year end.”

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SpaceX, though, is just one part of a much larger trend. As Luke Kawa writes, “The AI boom at the heart of an unprecedented reliance on capital markets (and you!) to finance its spending ambitions.”

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However, as economic historian Edward Chancellor warns, “OpenAI, Anthropic and SpaceX fit the late economist Hyman Minsky’s notion of Ponzi finance units, where loss-making businesses need to show capital appreciation to validate their liabilities. If valuations don’t rise… The whole thing would implode.”