SpaceX’s entry into the Nasdaq-100 Index has put the company in the investment portfolios of millions of people through retirement accounts, mutual funds and index-based investments. But veteran investor Jeremy Grantham believes the excitement around the company has gone too far.
Grantham, the co-founder of investment firm GMO and a well-known market “permabear” because of his cautious views on investing, said SpaceX is “the craziest IPO in the history of man.” Speaking on Morningstar’s The Long View podcast, he said today’s excitement may not last forever.
Grantham has long been known for taking a cautious view of markets. He has often warned about market bubbles and has previously said that artificial intelligence could eventually lead to “blood in the streets.”
Veteran investor questions the excitement around SpaceX
Before going public, SpaceX said its long-term goal is to “build the systems and technologies necessary to make life multiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars.”
Grantham said these promises may sound exciting today, but he believes they will be viewed very differently in the future. “Everyone’s lining up to tell you to buy the craziest IPO in the history of man,” Grantham said during his podcast experience. He added, “In 50 years, they’ll be telling and writing stories about SpaceX, and they’ll be quoting you paragraphs from the prospectus, and you will be laughing at it.”
Grantham says reality will eventually catch up
Grantham said he believes reality will eventually catch up with the company. “In the end, the reality will come out, and this will turn out to be, of course, one of the landmark historical events that I so value in history looking back,” he said.
He went on to add, “It will be amazing, by the way, if it doesn’t collapse, because it will need such massive developments on AI that our entire lives are totally different.”
Grantham also questioned why many Wall Street firms are recommending the stock to their clients. According to him, even if SpaceX’s current valuation eventually proves to be justified, it would mean the world had changed dramatically.
He said society would become a “strange one” where “we’ll be lucky not to be bossed around by our automaton friends.” He described that possibility as “rather horrific” and said he still believes a market crash is more likely, “though both ways it will be historically notable.”
Nasdaq inclusion could keep demand high
Grantham also spoke about SpaceX’s rapid inclusion in the Nasdaq-100 Index. He believes the move itself could help support the stock because many investment funds that track the index will now have to buy SpaceX shares.
“What that means is there’ll be a lot of people who have to buy it for any index that is Nasdaq-y. So there’ll be much more demand than there are sellers,” he said. He added, “So supply and demand being what it is, it’s hard to imagine the price won’t go up, and perhaps it will go up a lot.”
SpaceX shares have slipped after a strong debut
SpaceX made its stock market debut on June 12. The shares started trading at $150, above the IPO price of $135. By Wednesday afternoon, the stock was trading at around $149 a share and was down nearly 7% for the month.
Even with the recent decline, several major Wall Street firms remain positive about the company’s future. Goldman Sachs, JPMorgan Chase and Morgan Stanley have all issued bullish forecasts, with price targets ranging from $205 to $300.
SpaceX’s public offering raised $75 billion, making it the largest IPO in history. It surpassed the previous record set by Saudi Aramco, which raised $29 billion when it went public in 2019.
The IPO also pushed Elon Musk’s personal wealth to new heights, taking the value of his holdings close to $1 trillion, a level no individual has reached before.