SpaceX debut could ‘suck the oxygen’ from Europe’s IPO space
SpaceX’s upcoming initial public offering will be the largest stock debut in history; but market watchers suggest the sheer size of the launch could squeeze investor demand for other new listings.
Samuel Kerr, Mergermarket’s global head of equity markets, said SpaceX’s long-awaited listing, expected on June 12, comes at a time when Europe’s IPO market is trying to gain momentum, in stark contrast to the US market, which is “completely booming”.
With a potential $75 billion IPO and $1.75 trillion market valuation, SpaceX’s initial offering is “otherworldly,” Kerr said. Such a listing would dwarf other recently launched companies, including artificial intelligence chip maker Cerebras Systems, whose blockbuster IPO last week boosted its market value to nearly $95 billion.
“There’s a possibility that this could be negative for the entire global IPO market,” Kerr told CNBC’s “Europe Early Edition” on Tuesday.
He noted that typical IPOs aim to be covered at around five times pre-pricing, meaning demand for SpaceX’s offering likely should be “well above” $75 billion.
This has the potential to “really suck all the oxygen out of the room for others,” Kerr explained. “Everyone’s eyes will be on SpaceX.”
Given the scale of capital the deal is expected to attract from the global capital markets investor base – with investors potentially allocating significant orders to the listing – “almost nothing will want to be in the market at the same time,” he added.
Elon Musk’s company is expected to announce its IPO in the coming days.
‘Negative cocktail’
This landmark debut and the potential capacity squeeze caused by other blockbuster listings like OpenAI further complicate the outlook for Europe’s IPO space, which is already grappling with ongoing bond market volatility and the prospect of impending interest rate hikes.
Kerr said macroeconomic pressures, combined with the ongoing uncertainty around the Iran war, its impact on supply costs and rising energy prices, as well as structural weaknesses in the European IPO space, where many new IPOs have underperformed last year, amount to a “pretty negative cocktail” for the market overall.
“Rises in global interest rates are a big problem for the IPO market… Another component of this negative cocktail is high bond prices,” he added.
“We didn’t actually expect the first half of the year to be incredibly busy, but everything we expected to see in the first half of the year has now been largely postponed, at least until the second half.”
Cerebras Systems.
Looking ahead, Salman Ahmed, Fidelity International’s head of global macro and strategic asset allocation, warned that a wave of mega-IPOs could temporarily drain liquidity from broader equity markets.
With SpaceX, OpenAI and Anthropic in the frame, Ahmed said the sheer size of the upcoming deals could create a major “supply event” for stocks, forcing portfolio managers to rebalance their positions and potentially trigger a period of market “indigestion,” especially in heavily concentrated U.S. stock markets where earnings are dominated by a handful of big winners.
“They’re going to have to pull a lot of capital out of the system, and so I think that’s another reason why we need to be careful about the winners right now, because capital is going to be pulled out of there to fund these mega IPOs.”
— CNBC’s Lee Ying Shan contributed to this story.
