Investors are raising cash to buy shares in SpaceX and it's hurting other stocks - for now, according to Fundstrat.
The upcoming SpaceX IPO is currently creating wobbles for other equities, Thomas Lee, managing partner and head of research at the New York-based boutique firm, wrote in a note on Tuesday. The Starbase, Texas-headquartered spacecraft manufacturer is set to go public under the ticker SPCX $(SPCX)$ on Friday on the Nasdaq in New York, with shares priced at $135 each, paving the way for a market capitalization of almost $1.75 trillion.
In the near-term, Lee holds that SpaceX's upcoming float is dragging down U.S. stocks, mainly due to investors selling equities to raise cash to buy shares in Elon Musk's company. But he maintains that a successful debut will create excitement in the market following its IPO, creating a boon for other stocks.
It comes as the S&P 500's information-technology sector XX:SP500.45 was down about 2% by Tuesday's close, or nearly 9% in the past five days.
Meanwhile, the S&P 500 (ES00) is set to decline by 0.8% and the Nasdaq 100 (NQ00) is due to fall by more than 1%. Futures linked to the Dow Jones Industrial Average (YM00) are down 0.7%.
According to Fundstrat, the IPO is already oversubscribed by about four times, and could move up to 10 times by Friday. For a fund manager placing an order of $100 million, between $10 and $20 million in stock will be received. And Lee estimates that significantly more stock will need to be bought when the company is likely added to the Nasdaq 100 NDX and Russell 1000 RUI indexes. If SpaceX trades favorably, which Lee is predicting, it will have a positive effect on equities after its initial launch.
"SPCX and other companies raising capital in public markets allows public investors to have direct exposure to some of the most important companies in the world," Lee said. "And naturally, as these companies raise additional capital, this fuels further funding for the AI ecosystem."
But later in the year, Fundstrat expects three potential factors that could lead to another decline in stocks.
Markets could be tested by Federal Reserve Chair Kevin Warsh's shifting views on inflation and policy guidance, the upcoming supply of shares from SpaceX, OpenAI and Anthropic and possible shortages of oil products later this year resulting from disruptions caused by the closure of the Strait of Hormuz, Lee wrote.
