7 Reasons I'm Avoiding the SpaceX IPO Like the Plague -- and You Should, Too!

SpaceX's debut besides starts the timepiece connected its entranceway into the technology-driven Nasdaq-100, and the Russell 1000 and Russell 3000 indexes. Although the committee overseeing additions to the benchmark S&P 500 (SNPINDEX: ^GSPC) chose not to amend the rules governing scale inclusion, changes to the Nasdaq-100 and Russell Equity Index Series inclusion methodology tin fast-track SpaceX's entranceway into these indexes aft 15 (Nasdaq-100) and 5 (Russell Equity Index Series) trading sessions.

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But portion retail capitalist enthusiasm surrounding this IPO is heavy capable to chopped with a knife, there's an arsenic agelong database of justifications wherefore SpaceX banal should beryllium avoided similar the plague. There are 7 reasons, comprising structural, operational, valuation, and humanities components, wherefore SpaceX has nary concern successful my (or your) concern portfolio.

1. Structural protections were removed, paving the mode for insiders to currency retired

Arguably, the astir glaring informing with the SpaceX IPO is the aforementioned structural changes to scale inclusion, coupled with the company's unorthodox lockup period.

Fast introduction into the Nasdaq-100, Russell 1000, and Russell 3000 volition unit scale funds to walk tens of billions of dollars purchasing SpaceX shares soon aft its debut. Given that SpaceX is selling lone a small implicit 4% of its outstanding shares (notably little than the 10% to 20% observed with astir IPOs), this forced purchasing by scale funds volition gobble up a important information of the archetypal interval and could artificially boost its stock price.

This artificial stock terms boost coincides with an accelerated lockup play for astir insiders. Excluding Elon Musk, insiders tin statesman selling a information of their shares arsenic soon arsenic the 2nd trading time aft SpaceX's archetypal quarterly study successful August. This unsocial lockup period, the company's debased float, and the removal of capitalist protections to fast-track SpaceX into respective large indexes should facilitate a wealthiness transportation from retail investors to insiders arsenic they currency out.