New TAM of $UBER ( ▼ 1.01% )
Possibly the craziest IPO I’ve seen since the dotcom era is happening this week. Yes, it’s the SpaceX IPO.
The standout coverage from the past week comes from The Financial Times ("Wall Street’s red carpet for SpaceX") and a sharp critical analysis from The Guardian ("SpaceX will get off the ground – but a descent from a silly valuation must follow").
I’m not going to rehash all the ink that’s already been spilled. Just know that the most likely outcome is an insane amount of wealth destruction when you look more than one year out.
Because the math is unforgivable: xAI has to scale 100x its revenue by 2030 to justify the $1.8 trillion price tag. Good luck paying for and building out all that capex.
Half the reason I started writing this is to analyze the latest hotness through the lens of an old curmudgeon who’s seen his fair share of shenanigans over the years.
Snowflake ($SNOW) as a comp. With “comp” pronounced caveat emptor
Even going back just 5 years ago, acknowledging that tech businesses scale much faster than the rust-belt industrials of yore, Snowflake’s ($SNOW) TTM revenue when it IPO’ed in 2020 was $265MM. Its current TTM revenue is ~$5B, or roughly 20x higher than it was 5 years ago.
At IPO, Snowflake was valued at an extraordinary 150x trailing sales (and roughly 50x forward sales). Today, while its annualized revenue has grown ~20x since its FY2020 baseline, severe multiple contraction has brought its price-to-sales ratio down to roughly 16-17x forward revenue.
Snowflake was priced at $120 per share, opened at $245 and closed the day at $253.93. Between then and now it bottomed out at $108 per share and then recently climbed back to ~$240 as of today thanks to yet another hot tech rally.
Dead money for 5 years if you bought on the first trading day.
So as I always say: there’s no reason you have to participate and there’s many other easier ways to build your portfolio.