The largest IPO in history may also have been "the largest exit liquidity operation in history," hedge fund manager and former Peter Lynch assistant George Noble said in a recent newsletter. Here’s why Noble thinks the SpaceX (NASDAQ:SPCX) IPO was a historic misallocation of capital that was “built to separate retail investors from their money."
SpaceX Bear Stays Bearish
Noble has described himself as one of the biggest bears on the SpaceX IPO. Weeks after the company’s public debut, he remains firmly bearish.
"SpaceX went public at more than 90x revenue, and the insiders who bought in at a fraction of today’s price are about to start selling their shares to you," he wrote in a recent Substack post.
Noble highlights the fact that SpaceX has never turned a profit in its history and lost around $5 billion last year.
"At the offering you were paying more than 90x revenue and at the peak the market briefly valued it near 140x," he wrote. "Shares have given back the entire squeeze and slipped below their opening print."
‘Biggest Misallocation’
Noble, who previously ran the Fidelity Overseas Fund, said he has watched every disaster since being Lynch’s auto analyst in 1981.
"I am telling you this is one of the great wealth transfers of my lifetime packed into a fancy narrative."
The investor emphasized SpaceX’s lack of profits and its limited initial float, which helped fuel demand from investors drawn to the company’s well-known name.
When it comes to hype, Noble can’t help but compare SpaceX to another Elon-Musk led company, Tesla Inc (NASDAQ:TSLA).
"Tesla was the biggest misallocation of capital in the history of stock markets. SpaceX may have just surpassed it."
SpaceX Stock Hits New Lows
On Monday, SpaceX stock hit new lows since going public, with shares trading as low as $137.68.
The stock was priced at $135 at the IPO before opening for trade at $150. Investors who bought in at the IPO are still profitable, but potentially not for long.
Other investors who bought in after shares went public are now down on their investment unless they were able to sell in the first days of the space stock being public.
Analysts have come out with price targets on SpaceX stock with many pointing to the potential long-term valuation and high addressable markets for the company.
Others like Noble have been quick to point out the lack of profits and financials to justify the large share price and multiples. A lack of profits could keep SpaceX from being in the S&P 500 for years, with the index not changing its rules to include the stock.
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