AWM Insights Financial and Investment News

In this episode of AWM Insights, hosts Justin Dyer and Mena Hanna break down the buzz surrounding the historic SpaceX IPO. They examine the mechanics behind the IPO's massive valuation, offer candid opinions on market hype and intentional scarcity, and discuss the psychological traps that lure investors into chasing big headlines. With a clear-eyed look at risk, FOMO, and disciplined investing, this conversation brings professional expertise to one of the most talked-about financial events of the year. Whether you're curious about SpaceX or looking to sharpen your investment playbook, you won't want to miss these timely insights.

Chapters
(00:00) SpaceX IPO as a Historic Market Event
(02:00) Share Structure and Intentional Scarcity
(03:40) IPO Pricing Dynamics and Market Patterns
(06:20) Hype, Human Behavior, and FOMO
(08:30) Fundamentals vs. Valuation Concerns
(12:04) AWM’s Long-Term Investing Approach
(13:30) The Smart Entry Point and Investment Discipline

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Creators and Guests

Host
Justin Dyer
Chief Investment Officer and Chief Operating Officer at AWM Capital
Host
Mena Hanna
Senior Investment Analyst at AWM Capital

What is AWM Insights Financial and Investment News?

A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.

SpaceX is going public.

It is truly a momentous day.

Facebook was a similar example.

They IPO'd and they were down 30%
in the first six to 12 months.

Just because they have a great
product, a great business, the entry

price always has to make sense.

Participating in IPO sounds interesting,
sounds flashy, but it is a dead

giveaway of unsophisticated investing.

There's a FOMO element where
you just think this is gonna

be the next best thing, and you
want it and you want it now.

It's really important to highlight that
incredible companies that do incredible

things, that make incredible products, are
not necessarily an incredible investment.

Financial markets have already
swung and the ball hasn't

even left the pitcher's hand.

Our job is really to sift through that
noise and figure out what are the high

probability ways of allocating our
clients' hard-earned money so they can

live that more flourishing life, right?

Justin Dyer: Hey, everyone.

Welcome back to another
episode of AWM Insights.

It's your host, Justin Dyer, chief
investment officer here at AWM.

Glad to be here and joined as always
by Mina Hanna, one of our portfolio

managers here at AWM and my, uh,
long-standing co-host on AWM Insights.

Um, and we've got, I guess, a
special topic you wanna call--

if you wanna call it that today.

Um, and in a way, it isn't.

We're recording it generally,
uh, when we do on Thursdays.

Um, but the special topic is SpaceX
is going public tomorrow, and, and

it is truly a, a momentous day,
um, in financial mar-markets, and I

would even extend that to, I guess,
just broader, broader society.

Um, we've never seen anything like this.

It's, uh, historical and, uh, on a
couple different fronts, and, and

we're just gonna get, get into it.

How do we think about it?

Answer the question, should
people participate in it?

You know, getting a little bit
more specific to the SpaceX IPO.

I know we recorded a podcast a couple
weeks ago about IPOs in general.

Don't make sense to participate in, right?

Kinda punchline, uh, there.

But yeah, we're gonna give a little bit
more context, um, around that general

answer with respect to SpaceX and, and
some of the nuances that are at play here.

Like I said, it is, uh, truly a historical
event and, uh, by the time you're

listening to this, um, we'll know a little
bit more about actually how it's going

to be trading and, uh, and, and we're
gonna be watching it pretty closely.

So, uh, without further ado,
we'll, we'll jump right into it.

Mina, as, as we usually do, um, let's just
go through kind of the, the, the basics.

Let's level set first principles.

SpaceX is going public tomorrow.

It's Friday, June 12th.

Um, it's the largest IPO in history.

What else am I missing there?

Mena Hanna: Uh, just the float component,
which not a lot of people talk about.

So when a company, in this case, is going
public, they're printing new shares.

In SpaceX's case, they're creating
eighty-five billion dollars worth

of shares, and those shares are
actually going to be the shares

that actually hit the market.

Justin Dyer: Right.

So not that total one point seven
tril-- seven seven trillion.

That's not all being traded.

That value is not being traded.

Just a small little portion of it is.

That's the float, that
eighty-five billion dollars worth,

Mena Hanna: Yeah, and
that's roughly four percent.

If you released all $1.77

trillion, there would be a lot of,
call it, issues in, in markets.

There would be too much supply.

What we're actually probably going to
see, because it's only four percent of

the total company, is you're probably
gonna see a little bit of scarcity.

And when there is scarcity, there's
one thing that, that's to be known,

and that's prices kind of get wonky.

So it's sort of expected a little bit
that this, this release and the way that

the shares have been structured, and
I would say intentionally, intentional

scarcity that's being created, that
is going to create just some market

pressures that could swing prices
dramatically in, in all directions really.

Justin Dyer: Just good old supply and

Mena Hanna: good old supply and demand.

Good old supply and demand, yeah.

And then slowly over time,
there's going to be all of those

restricted shares, those $1.7

trillion worth of shares that are
restricted, those are going to slowly

be unrestricted and, and hit the market.

So there's going to be periods of
time, and these are known periods of

time, when supply kind of dumps into
the market, and that could be, and,

and typically is, we've seen this
with the ten largest IPOs in history.

On average, those are actually
times where sophisticated investors

actually take chips off the table.

Amateur investors are typically still
buying in, and this is where the

trade happens that hurts your, your
unsophisticated investor, and typically

why IPO prices are, are the high point
and prices in six to twelve months

are, are typically lower and, and they
underperform the markets on average.

Justin Dyer: That's right.

So it-- we, we covered that
general take in, uh, what was it?

Two episodes ago- Yeah … three
episodes ago, where, yeah, there's

generally a downward, um, trend,
which is why we say it doesn't

make sense to participate in IPOs.

Again, that comment is specific
to buying at the IPO price.

So, uh, what is it?

A hundred and thirty-five
dollars a share for, for SpaceX.

Um, not to say, you know, we're not
calling the shot and saying, "Hey,

SpaceX is gonna be down on day one."

To your point, there's some
manufactured scarcity here, so kinda

if we're a betting person, right?

You're-- putting you on
the spot a little bit.

What, you know, tomorrow is,
is it gonna be up or down?

Like just from a pure directional

Mena Hanna: I, I would say it's up.

Like, unfortunately, investors
typically just can't help themselves,

and they will just swing at the
first pitch they see, no matter

how, how bad it's actually gonna be.

Like i-in this case, I would say financial
markets have already swung, and the ball

hasn't even left the pitcher's hand.

So it's, it's like a, it's a, it's
an issue, and like the count's…

Justin Dyer: You're still in the batter's

Mena Hanna: box.

Yeah.

Yeah.

So, uh, that's like problematic, but
that's just the human emotion piece, and

we've been hearing so much about SpaceX.

There's been so much material.

The road show's been great.

You know, you're getting analysts
kind of publishing these reports that

they think that SpaceX is gonna be
worth twenty-eight trillion dollars.

So these are all, these are all
points that just create irrational

behavior, and, and people are just
gonna swing way, way, way too early.

And we've seen this before.

You know, history doesn't
repeat, but it definitely rhymes.

And I, I do see markets kind of
swinging at this first pitch very

aggressively and, and the price
popping up on that first day.

Now, what happens after that?

We've typically seen a sell-off.

But, but yeah, I would bet on the
first day that the price is, is higher.

Justin Dyer: Yeah.

I should've said on deck, not-
Yeah … not in the batter's box.

What do you think?

But, I mean, I would agree.

I, I think, um, yeah, you know, again,
I'll, I'll, I'll take your, your question

and, and give a little bit more of,
uh, the broader AWM Capital way of, of

investing, the philosophy we have, which
is very much rooted in probabilities.

And this is super interesting.

It, it's interesting on from a just, you
know, uh, let's call it a financial or

history of financial markets standpoint.

It's his- it's interesting from a human
psychology standpoint because of how, how

much hype has been driven around this.

But at the end of the day, that's
happened before in varying degrees, um,

over time, and, and it happens in large
scale events and small scale events.

But our job is really to, to sift
through that noise and figure out

what are the high-probability ways of
allocating our clients' hard-earned money.

So we have confidence that they are
going to have the money when they need

it to meet those incredibly important
priorities in life, so they can live

that more flourishing life, right?

Like, you know, maybe that sounds a
little too touchy-feely and whatnot,

but that is-- that's our charge.

That is how we think about investing.

And when you are talking about something
like this, it is so far from that general

application that, yes, again, interesting,
we're gonna pay attention to it.

My eyes are gonna be glued on
the m- the screens tomorrow, but

it, it's just not supporting the
flourishing hundred-year family.

Now, that's not to say
we don't have exposure.

We do in, in our private funds, and
we do-- we, we have it in a way that

lines up with our philosophy, which
we'll talk about a little bit today,

um, and we, we covered in past episodes.

But to answer your question specifically,
like I, I think it will be up on day

one i-i-if I, if I were a betting
person, which I most definitely am not.

Um, which kind of brings us to
an-another question is just like,

why does this happen, right?

What is-- Why, why do most
people get these things wrong?

Mena Hanna: A lot of it is just
like, not to get too preachy,

but just human psychology and,
and greed for the most part.

There's a FOMO element where you just
think this is gonna be the next best thing

and, and you want it, and you want it now.

We sort of, you know, relating it to
another Elon product, the Cybertruck.

We saw the same thing there.

People were paying like $100,000
over the price of the Cybertruck

for the first week that it was out.

And it was cool.

Like you would see a Cybertruck around
and you'd be like, "Wow, that's so cool.

That's so different."

But that value eroded
as the supply increased.

In a situation like this, like we
know the supply is gonna increase.

We know that more shares
are gonna hit the market.

And where you're also getting at just
from a valuation standpoint is very rich.

Like you are paying $200,000
for kind of a tin can in a way.

Um, and if I had $200,000, you know,
I would buy-- I'd buy a Ferrari.

Uh, when you kinda look at the market
cap of what SpaceX actually is, they're

gonna be more valuable than Tesla,
which is a, a real company that produces

Substantial revenue, um, and has just a
lot more, a lot more earnings than SpaceX.

SpaceX is an unprofitable company.

It's more than Saudi Aramco, more
than Facebook Meta, more than

Samsung, more than Berkshire Hathaway.

So-- And substantially more than Berkshire
Hathaway, like $700 billion more.

So these are all just data points
that show you that, yeah, a lot of

this is just greed, a lot of this
is just low demand, a lot of this is

fear of missing out, and that just
drives people to do irrational things.

It drives people to, to swing at
the first pitch when it hasn't even,

you know, left the pitcher's hand.

Justin Dyer: Yeah, one hundred percent.

I mean, uh, you know, to bring it
back into our framework again as well,

it's-- this is a very consumption,
hype-driven event that doesn't have

a lot of purpose supporting it.

Now, I say that, and I also wanna
acknowledge that SpaceX, SpaceX

is a, an incredible company.

But it's, uh, really, really important
to highlight that incredible companies

that do incredible things, that make
incredible products are not necessarily

incredible investments They can be at the
entry point if the entry point is right.

But things like this where the narrative
has really kind of detached from reality,

uh, and purpose, again, bringing it
back to purpose of a dollar to support

family priorities, uh, that hundred-year
family specifically, this just doesn't

really line up with that framework
that, that we believe in so strongly.

Um, and, and, and like you said, that,
that good old human, human element fear

of missing out is an incredible, uh,
incredible force, uh, generally speaking,

for, for bad, um, bad outcomes over time.

Mena Hanna: Yeah.

Facebook was a similar example.

They IPO'd, and they were down
thirty percent in the first,

you know, six to twelve months.

So we've seen it happen before, even
with generational companies that

are, are great businesses kind of
doubling down on exactly what you said.

Just because they have a great
product, a great business, there's

line of sight there, the entry
price always has to make sense.

Justin Dyer: Uh, uh, and just along
those lines, by no means are we putting

a, a line in the sand and saying, "Hey,
six months from today, Space-SpaceX is

gonna be worth less than it is today."

This narrative can continue.

There's no doubt about it.

Uh, we just don't feel like it's
a high probability or a high

confidence event to participate in.

And, you know, that being said, we're
also very diversified public market

investors, and we will end up having
exposure to SpaceX in some way,

shape, or form at some point in time.

But we're gonna do it in the right
sized allocation in a methodical,

thoughtful way of, of building,
uh, building that exposure.

Um, kind of bringing this to, to a
conclusion to an extent, like let- let's

just in a way summarize, like what's
the playbook for our, our clients, Mina?

Just let's walk people through it.

Mena Hanna: clients?

I mean, and just let's
walk people through it.

Yeah.

The cool thing for a lot of our clients
that are invested in our venture funds,

you already have an allocation to SpaceX.

You have an allocation through
a vehicle that we invested in,

and that was purchased early.

It was purchased before all of this craze.

It was purchased at a lot more
reasonable valuation, and that's a

position that you, you already hold.

So there's no need to, you know,
fear missing out because you already

have, you know, tickets to the party.

That's, that's one side, and that's gonna
be managed, and that's going to be exited

when it makes sense to actually exit.

On the other side, if you're not a client
or if you don't have exposure in general,

probably does not make sense to, to get in
on that first day, to take a swing early.

Kind of have to be methodical,
thoughtful about how you're

actually approaching this.

Um, I, I would say the good news is if
you are invested in funds in general,

if you have a diversified portfolio,
you are going to establish ownership.

Now, index funds, which we don't
love, are gonna do that in,

in kind of a, an improper way.

A lot of index funds are actually
breaking their own rules, and

they're moving up the timeline to
incorporate SpaceX super early.

Usually, they set a twelve-month
kind of buffer zone.

Some people, some index funds are
adding SpaceX in five days, some

are adding it in fifteen days.

So you are, you are going to buy
in potentially at the craze, but

at least you'll, you'll have an
allocation, and it'll be right-sized.

It won't be a tremendous amount.

I think most of these funds are
gonna end up picking up like 0.1%

of the actual holding of the total fund
in SpaceX, but you'll have something.

So those are kind of, uh,
the approaches I would take.

If you are kind of thinking about
investing in SpaceX now, definitely be

cautious, and this is just something that
goes back to being a thoughtful investor.

You want access to these
companies earlier on.

You don't wanna be kind of flooding
into to the, to the market when everyone

else is and when everyone else wants to.

You wanna get in early and
get in at better prices.

So, so yeah, you just have to be, be
thoughtful in doing that, work with

the right team, and, and obviously
do so with the right structure to, to

get in and get in at the right time.

Justin Dyer: And I think that's
a great quote to extract or

even an, an end on, right?

There's gonna be so many comments
and questions in the locker room or,

you know, the proverbial cocktail
party over the next couple of days.

"Hey, did you get in?"

And that's not the right question, right?

That's the question that is a
dead giveaway that, that, that

person is too late to the party.

The question is when-- what was
the smart entry point, right?

The smart entry point was many, many
months and years ago, if not even

farther, um, uh, in the history or farther
back in history versus the IPO date.

Participating in IPO sounds
interesting, sounds kind of flashy,

but it is a dead giveaway, uh,
of, I would say, unsophisticated

dollars or unsophisticated investing.

So, um, we'll leave it there.

Hopefully, this conversation
was super helpful.

Um- You know, I ho- and I, I hope
th- hope this conversation ages well.

Maybe we, in, in six months we'll do
a retrospective and, and, uh, kinda

check ourselves and make sure, uh, um,
you know, w- we were, we were, we were

thinking about things the right way.

We, we always like to, uh, hold ourselves
accountable, so may- maybe that will be

a fun, uh, topic six months from today.

Um, but in all seriousness, definitely
shoot us questions around this or,

uh, you know, again, anything, um,
investing related you want our take on.

We always like to have topics
to, uh, discuss on this podcast.

Mena Hanna: The number is- Yeah.

Six two six eight six
two zero three five five.

Justin Dyer: And until next
time, own your wealth, make an

impact, and always be a pro.

Thanks for listening.