Investing in tangible cashflows versus speculating purely on a price is at the heart of Tideway’s investment philosophy.
Next month we have a big (huge!) capital event – the SpaceX IPO. It is worth looking at this IPO in some detail and with Tideway’s investment philosophy in mind to see its wider impact on investment markets and our portfolios.
First, let’s try and put some context around this historic IPO. To do this I have compared it with Amazon’s IPO in May 1997.
The data was all sourced from Google AI which used verifiable sources. F = forecast
Of course, the US stock market has increased in value by 7-8 times since the Amazon IPO, Amazon is worth almost $3trn. But just looking at the scale factors, you can see why I am drawing your attention to this particular capital event – it’s on steroids! Amazon has annual revenues of c$750bn and makes c$100bn profit. SpaceX has revenues of just less than $20bn and has yet to turn a profit. What could possibly go wrong!?
Why is it happening?
Firstly, of SpaceX’s three businesses – Starlink (satellite internet coverage), Space (rockets) and XAI (artificial intelligence) – Space and XAI are massively capital intensive. SpaceX needs cash and lots of it. To raise $75bn in private capital markets at a time when most private equity and credit funds are trying to exit investments would be impossible.
The public markets are the only way for SpaceX to keep spending.
Secondly, while private equity investors – who own over 50% of the company (although Elon has 85% of voting rights!) – will likely be locked in for six months after the IPO, they will want to get some money off the table as quickly as possible. Any process that allows them to do that at anything near the forecast IPO price is going to bring them astonishing capital gains and riches.
Plus, Elon becomes the first Trillionaire on paper.
“Why now?” is probably the more interesting question. We won’t ever know for sure. The pressure may be coming from SpaceX’s private equity investors, but the fact that two other monster private tech companies (Anthropic and Open AI) are also eyeing up IPOs this year suggests that insiders in the tech industry think the current public price is right. Boosted by the furore over AI, public markets are putting huge valuations on AI participating businesses.
You list companies when the stock market is buoyant (dare I say toppy) and you take them private when public markets are depressed. They want to get these IPOs done before the IA party ends, before the music stops.
For sure, if Elon pulls this off, he is also making good on his promises to his private equity supporters who have funded SpaceX to date and helped him buy out Twitter (now XAI which has been merged into SpaceX). The IPO keeps everyone happy.
Will it fly?
My guess is yes, it will, and it may be stratospheric. But I don’t see the party lasting that long.
It feels like there is just about enough going on in SpaceX to create the lure of future profits, obviously incalculable today without extreme extrapolation. You just have to believe!
The Business
SpaceX’s satellite internet business, Starlink, is effectively a monopoly. It is hugely profitable and still has some scaling up to do. On its own this would be a great and easy to understand business.
I don’t know much about rockets, but I know someone who does. I asked one of our youngest clients and fellow Imperial College physics graduate, now embarking on a PHD in near space technology (mostly satellites), what he thought of the rocket business.
His response was very clear: the reusable rocket technology that SpaceX has delivered has given it a near monopoly in launching stuff into orbit, which looks like extending for at least a decade. He estimated that at $70million a launch, 30% cheaper than a one-off rocket from SpaceX’s competitors, SpaceX might make as much as $50m a launch. European space agencies that launch satellites felt the reusable rocket would not work. Musk has proved them wrong and earned a 10-year jump on the market. SpaceX did 85% of all space launches last year.
Retail investors love this stuff; it’s a great story and very much backs Elon’s cult status as a tech innovator.
The IPO
This, combined with Elon Musk’s reputation from the success of Tesla shares and the current trend of ‘casino investing’, as Warren Buffett describes it, will no doubt create huge demand at the IPO in June from investors prepared to disregard fundamentals and look just at price momentum. If the target price is met, only c4% of shares will need to be floated initially to raise the target capital, so the price could rocket initially (excuse the pun!) as demand exceeds supply.
Well known stock commentator in the US Jim Cramer has suggested it could go to $5Trn market cap immediately after the IPO for this very reason and if it garners ‘meme stock’ support and momentum. This sort of reporting just feeds the speculation frenzy of often leveraged short term share traders.
The role of passive investors
Then come the passive index investors. With more than half the world’s investors investing passively through index trackers, as SpaceX’s free float expands, passive funds will have to sell other companies and buy SpaceX shares to stay in step with the index. This will be the exit route for all those private equity investors in SpaceX.
It will be after the index funds have taken up the slack that longer term institutional investors might start asking about the valuation relative to revenues and profits, current and projected, to decide if SpaceX is a good investment.
Up until then, none of the investors will have really thought much about the price of SpaceX shares!
Nick shared with me a great article from MSCI this morning about the queue of private companies that could list onto public markets if they stay buoyant enough. It gives their private valuations as of the start of 2026.
Source: MSCI, “How Megacap IPOs in 2026 Could Reshape Global Benchmarks”, 11 February 2026.
BTW, ByteDance owns TikTok, and the $875bn valuation put on SpaceX versus the target $1.75Trn target IPO valuation shows the mark up in under six months.
The article goes on to explain that most listed companies in these sectors end up with c90-95% free float as a percentage of their shares listed on the market, and on this basis all 10 companies would be MSCI world index constituents. This would represent a further shift in the index towards tech and US concentration. If Jim Cramer is right, SpaceX would not just be in the index – it would be a top 10 constituent of the world index.
As Michael Burry describes this possibility, it could see the biggest ever risk transfer from private capital investors to public markets investors in history, driven primarily by speculation and with investors not questioning the price.
Needless to say, Tideway will not be ‘stagging’ (90s term for buying shares at an IPO to hopefully sell in the short term at a profit) the SpaceX IPO and we feel relieved not to own index funds that would drag our clients into these investments at any price.
One final thought on SpaceX. Before Elon’s Mars colony plans, his more immediate plan is to build AI data centres in space, as soon as 2028 he says (huge pinch of salt over shoulder!). His case: the cost of getting stuff into space is coming down, solar electricity is five times more efficient to generate in space than on earth, and in space you have thermal radiative cooling in the space vacuum, which doesn’t need water.
Furthermore, Elon argues that the current earth-based data centres will fail to meet AI demand before they run out of affordable power and cooling water.
As a scientist, I find Elon’s argument very elegant. Sam Altmann, boss of Open AI, says he will fail and never be able to make them work. Sound familiar? Both can’t be right. If Elon is right there will be an awful lot of capital destroyed in the earth-based data centre supply chain, currently running red hot!
Tideway Portfolios
Down to earth again, we are relieved not to hold index funds which would drag our clients into these companies at any price. We feel much reassured that our active fund managers can stand on the sidelines and invest only if the case seems sound.
We are also pleased not to be over exposed to the crowded AI trade, nor equity markets generally as they surge higher based on a small number of companies going stratospheric in valuation. You want some exposure on the way up, but not too much when the music stops and we are trying to steer a prudent course through extraordinary times, although I have been getting a lot of late 1990’s déjà vu!
Equities
Below are our one-year returns on all our selected funds and Nick looks at the companies driving Jupiter Asian Income’s stellar returns in his piece below.
These are not normal one-year returns, but let’s enjoy them.
Source: Morningstar 29/05/2026
We will continue to have our finger over the rebalance button, which would take profits in the top performing equity funds and invest in the lower returning equity funds and fixed income. We have used it once this year already and we may use it again.
Fixed Income
Given the recent moves up in bond yields on anticipated inflation from the US/Israel/ Iran conflict, we are feeling good about the fixed income returns.
Gilts are still the main problem child, as yields rise and bond investors fret over UK politics, but there has been some respite in the last week.
Source: Morningstar 29/05/2026
