The Truth About IPOs | Podcast Episode #524

0:02
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0:19
You can succeed at the stock market, and I’m ready to show you how.
Hey everybody, this is Ryan Mallory with shareplanner.com.
Swing trading the stock market.
In today’s episode, we’re going to be talking about IPOs and the truth behind them.
Right now.
We just had the SpaceX IPO stock symbol SPCX just get released to the masses and retail bought it up and they they couldn’t get enough of it.

0:42
Took a a company that was worth over 1 trillion, made it as big as actually bigger than Microsoft at one point in its early first couple of days of trading.
Over $3 trillion in market cap in a sense come back a little bit there, but still a very hyped IPO.

1:00
Lot of people are trading it.
I saw just recently where the 1st 2 days of trading, the SpaceX IPO, there was more retail buying and just the SpaceX stock then the entire stock market combined for that whole week, just in two days more than the entire week of of the stock market.

1:23
So just crazy kind of stats that you’re seeing with it.
I’ve seen a lot of IP OS come out.
There’s been a just a, a ton of them to that people have gotten excited about, but I don’t know if any of them have ever been so overly priced and overly hyped as the SpaceX IPO was.

1:41
And So what I want to do in this podcast is really just focus on some of the realities that people are not considering when it comes to IPO, some of the traps that they may be walking into when it comes to these IP OS.
Because the, the truth is there’s two more major IP OS.

1:59
And I would say they’re probably just as big, if not bigger than the SpaceX IPO and open AI and Anthropic.
As much as we, you know, people use Twitter and much as you know, I look, I live on the Space Coast.
I see the Rockets go up in my backyard almost on a daily basis.

2:16
They’re always shooting up rockets.
So it’s even personal out that, you know, that the impact that SpaceX has just in my own backyard because I can see these rockets going up, but they shake my house every time they go up.
No complaints.
I, you know, I, I think having grown up since the, the days of the Challenger exploding, you know, from from where I was going to school that I could see it in the backyard.

2:39
I’ve grown used to kind of like Californians, how they get used to like the trimmers and their little earthquakes and stuff.
Not the big ones obviously, but the smaller ones you kind of just don’t even pay much attention to.
It’s the same thing with like SpaceX rockets.
There’s a lot of noise.

2:55
They shake and, and rattle your home when they go up, but you don’t really care too much in terms of, you know, it bothering you or anything like that.
Like a train, you get kind of used to it over time.
But I think that the open AI, well, back to my other point too, is that besides the open AI and, and the and Anthropic going going forward with their IP OS, I don’t think that they’re necessary.

3:25
The SpaceX IPO and and the Grok AI, the where a lot of the losses are coming from is as good as not even really close at this point.
Not that it can’t become better, but right now it’s not that is, you know, as good as open AI or Anthropic.

3:42
So therefore, I, I, I do expect the Anthropic and open AIIPO to probably be even more crazy and, and, and hyper driven.
And they’re taking notes on the SpaceX IPO.
They’re seeing how it played out.
They’re, they’re considering how they’re going to price the IPO.
And when you really think about what these IP OS are for, it’s the best opportunity for Wall Street and for the firm that’s going public to fleece the public for all they’re worth to, to milk them for anything that they’ve, they’ve got it.

4:14
If they felt like they could have priced it higher at 1:35, they probably would have.
If they, if they thought they could have gone away with 200, they probably would have done that.
So they’re trying to find that that happy medium of where they think they can get away with it.
Now, I guarantee you anthropic and open air taking notes and they’re probably saying, OK, whatever we thought we could get.

4:30
Did you see how high it went?
We were maybe being a little bit moderate with what we thought.
I think we can price it even higher because they’re trying to get as much money out of out of you guys so that they can take that money and invest in the company.
So if they can get more per share, by all means, they’re going to price that IPO at a much higher rate.

4:50
Now some of you guys got the IP OS and you were able to make a good buck off of them early on by being allocated some shares and that’s great.
That was that was a I don’t think a lot of people that got the allocations were worried about, you know, taking a loss on it initially.
But depending on how aggressive open AI and Claude gets or anthropic, I guess that’s also a possibility.

5:13
I’m not saying that’s likely, but if they’re too aggressive or if they’re they think that they can, you know, price it much higher than what the the market might afford it.
Then there’s always the possibility that it does finish red on the day and if you bought in right after it starts trading live for the first time, you could be a bag holder.

5:29
I mean, a lot of people are back holders up to the first day of SpaceX.
Obviously it gapped A pyre and and and ran to some incredible links that in the days that followed, but that’s that’s still a possibility.
So IP OS there’s a lot of excitement around it, opportunities to to get something that you’ve never had access to before in the past.

5:46
And it’s kind of like, kind of like the popular girl at school when you were in high school and then all of a sudden she’s, she’s available to date.
And so everybody’s going after her after she just broke up with her last boyfriend.
It’s kind of the same way where IP OS, it has that like scarcity, like, oh, this is, this is, I’ve not had access to this before.

6:07
I, I want that.
And that’s, that’s what a lot of like the emotions.
There’s a lot of emotions and IP OS that’s driving people to, to take trades.
And here’s the other crazy thing is, and I’ve seen this with a lot of retail traders where they’ll tell you that they think that they can take advantage of retail by jumping in on the trade and and make some money, But they don’t realize too is that they’re they’re part of the retail crowd as well.

6:31
They might come away with a profit, but a lot of people are thinking the same thing that you’re playing.
In fact, I would probably say everybody thinks that they can take advantage of everybody else.
In the end, the people who hold it too long are going to be the ones that are likely holding the bag there.
But for me personally, I don’t play IP OS.

6:48
I, I know that the belief is, is that this might be the one and only chance to get in at a price that you’ll never have access to again.
That’s rarely the case.
The history of IPO suggests radically different.
I mean, you take Meta when it was Facebook and when it went public, I think I want to say it was like 30 or $40 a share that it went public at and everybody thought that this was your one and only chance.

7:10
That sucker went all the way down to like 17 and obviously it it’s done very well since then, but there was a much better opportunity to get long.
And that’s what I’ll say and I know that a lot of people are going to like choke when they hear me say this, but I would not be surprised if SpaceX one year from today at some point doesn’t cross like 50-60 dollars a share even lower.

7:32
It would not surprise me by this time last year if it hadn’t taken a major dip.
And so whether it’s SpaceX or some of the other recent ones like like Meta, like Airbnb or Alibaba, almost every time you see one of these stocks go IPO, they they dip down over the course of the next three to six months.

7:54
In fact, from a investing standpoint, I wouldn’t even touch SpaceX for at least like 3 months.
You want to let it, you know, wash itself out.
People who want to get out, get out and then just see where it settles in at so that you can get in at a much lower price.
I’m not saying that’s for sure going to happen.

8:10
History suggests that it that it will happen.
But I’m not lying though, when I say that they’re maxing what they can get out of the retail trader.
Even the people who are getting the IP OS, they at the IPO price, they’re maxing out what they can get from the traders.

8:26
You look at just what some of the more famous IP OS have come out at and what their their valuation was that you go back to 2004.
And I think this is a good comparison because in 2004 the Internet was still in its infancy.
Yes, I’ve been around for a few years, but a is been around for a few years and it’s starting to, you know, obviously pick up steam with some of these models and what they can do.

8:49
And at the time, Google in 2004 was like a groundbreaking search engine.
So when it went public and went public at 23 billion, the revenue at the time was 3.2 billion and they had like a net income of about $400 million.

9:05
But they were only selling at 7X their sales.
Their price is 7 times their sales.
That is not that much.
What is SpaceX going at?
It’s going at 95 plus their sales 95.

9:22
They’re they’re trading at from the from the first day they were trading at 95 X.
And it’s not like Google was just like 1 where OK, they totally misvalued it.
No visa that came out four years later.
That was 7X.
You look at Meta that came out in 2012, that was 28 X Alibaba, 20X sales.

9:41
And you look at Airbnb and Airbnb was, was similar to SpaceX in the sense that Airbnb was actually printing a loss.
But they didn’t go 95 X, they went 14X.
And you can say, well, this, this, this is totally different.
We’re talking about rockets here.
We’re talking about colonizing Mars.

9:57
That’s exactly what we’re talking about colonizing Mars.
That should kind of be a little bit on the that may not happen list, OK.
And we very well may not ever colonize Mars.
And I know they got the AI stuff too, but they’re not even the front runner on the AI.
At least like with Google, Airbnb, Meta Visa, these were the top tier in their category.

10:18
If you’re looking at what, what was generating the the most money for them, SpaceX maybe like a third, third best at best AI company.
And if you’re all into the SpaceX, I know that like Starlink’s really good and I know a lot of people that love it.

10:34
It feels like an incredible niche, but I don’t think it’s $3 trillion good.
And so even like the IPO evaluations that I know over time things do change, but just like you know, some of them like Facebook, Meta, this was back in 2012.
Again, it came out at 104 billion versus again, SpaceX being at 1.7 trillion that it comes out at.

10:55
So I do think that even though even adjusted for price, what you’re seeing out of SpaceX was crazy, especially when you consider to a price to sales ratio at 95 X to what Meta did AT28X or Google at 7X.
I’m not saying that they should have come out at 7X, OK?

11:11
I think they would have been cutting themselves short and honestly at 95, if they would have done less than 95, they would have been cutting themselves short because the market gave it to them.
But I also think too, the reason why you’re seeing SpaceX right now want to do their IPO and reason why Anthropic and Open AI want to do their IP OS too later this summer is because that they know they’re in a unbelievable opportunity right now to capitalize on like an overhyped market where people are just willing to throw money at anything because they feel like they have to be in it.

11:45
And that’s, that’s one of the risks that a lot of people are taking right now.
And it’s a, it’s a, it’s a major risk that they’re taking too.
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12:03
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12:18
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12:37
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12:55
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Well, we’ve gone through a little bit of the the history of IP OS, OK?
We talked about how it compared to like Google and so forth.
And what I want to do now is just talk a little bit more about what does psychology a little bit more behind the psychology of it, what traders are doing here and what we can expect with the open AI and with the clock.

13:16
For one, I think they’re going to be more aggressive with those two than they were with SpaceX.
And the reason for that is that there’s going to be a lot of motions that are going to carry over from the SpaceX IPO into those two names there.
I can’t say for sure that that that they’re going to do great or that they’re going to do bad.

13:33
I don’t know.
We’ll see you when it happens.
But my hunch would be is that I think one of them will do bad.
I don’t know which one that’ll be.
But if I had to guess between, I’d probably say open AI will probably be the one that that struggles some.
Again, I don’t know that for sure, but what what I’m seeing though is that there’s going to be a lot of traders that are going to to harbor a lot of motions that could be, you know, from feeling like they missed out on a big trade or, you know, there’s going to feel like that.

14:02
If this is free money, like what look, I got in at, you know, 150 or 160 on on SpaceX and I sold it for $220 the next day.
That was that was amazing.
I’m going to do that again.
I guarantee you if you almost everybody that made a profit on SpaceX or at least of 10% are going to try to do it the same again with open AI and cloud.

14:25
Why?
Because that bias, that recency bias of what they experienced with SpaceX, they feel like that that’s going to translate over.
I would say almost everybody.
I’ll be shocked that they’ll probably be sleeping in if they don’t, but they’re going to do it because they’re going to have that confidence from what they experienced with SpaceX that it’ll translate into open AI and clod.

14:46
But what you can expect is that people are going to be more aggressive, especially at the very beginning, to get in as soon as they can because they’re going to say, hey, look, it opened up at 1:50 and it never looked back.
And that that thinking is going to tell them, I got to get in right at the open.
I cannot waste time.

15:03
And so it’ll create a misplaced confidence there.
A lot of people will be doing it because they feel like they missed out.
Maybe they they had an order in for like 140 and it didn’t get filled and they just watch to go for the rest of the day.
Now the next time they’re going to be very aggressive because they’re going to say, hey, I saw what happened last time when I didn’t pull the trigger aggressively.

15:22
I missed out on some crazy gains.
And so you can expect that mentality to weigh much more heavier.
And I think that Claude and, and open AI will be able to aggress, be more aggressive with how they price their IP OS.

15:38
And as a result, there’s going to be a lot of retail.
I don’t think retail is questioning whether or not when it came to SpaceX.
Well, they shouldn’t have done that at 1:50.
I was, I was a believer in SpaceX until they went up to, you know, one or it was 135, you know, and then when it opened at 1:50, I don’t think they were questioned whether or not they should buy.

15:54
They just bought it because they wanted to be in it again.
It goes back to that.
It has that feeling of scarcity.
I need to be in it.
And I think that would that misplacement of confidence, feeling like you missed out or just, you know, that the impression that these IP OS are free money.
And the one thing that is here with these IP OS that we’re seeing come out right now that wasn’t as prevalent back then is the social media influence that everybody’s telling you to buy this stuff.

16:20
And that’s really been, you know, post COVID where everybody’s kind of taking on that mindset.
So be careful out there.
Like I said, I I’ll wait a few months before I ever consider buying SpaceX and it’ll have to be at an incredible discount too.
And if I do trade it in the future, it’ll be because there’s a technical set up there as well.

16:37
I’m not going to necessarily do it because I believe in the stock.
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16:55
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17:16
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17:32
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17:47
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18:04
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