SpaceX IPO Hype Is the Oldest Wall Street Con in the Book

The IPO Hype Cycle Never Dies

Every few years Wall Street needs a new story. A new reason to get retail investors excited, distracted, and reaching for their wallets. Right now that story is SpaceX and the wave of IPOs that supposedly everyone needs to own.

I have been fielding these questions on every show I have appeared on for the past couple of weeks. And every single time I tell people the same thing. Slow down. Let me tell you how this actually works.

Because I did this job. I sat at the desk. I made the cold calls using Dun and Bradstreet cards, dialing CEOs to collect indications of interest for IPO deals. You mentioned the letters IPO over the phone and the CEO materialized out of thin air. That is how intoxicating the word was. Everybody wanted in.

I Watched the Racket Get Built in Real Time

Here is the truth about how IPO deals actually get structured, straight from someone who worked inside the machine:

• Allocation was never fair. The investment banks decided who got shares based on who was doing the most business with the firm. Retail investors were an afterthought.
• The crumbs were intentional. Giving small investors a tiny piece made them feel included. It was a marketing tool, not generosity.
• Aftermarket buying was encouraged. Investors who got a small slice were pressured to buy more after the stock popped. That is buying high and hoping for higher.
• Insiders had lockup periods. Once those expired, the smart money sold. The retail investor holding on was often left with a declining stock and a story about how they almost timed it right.

Not a bit of a racket. A massive racket. Those were my words then and they are my words now.

The SpaceX Allocation Reality

BlackRock is reportedly committing around five billion dollars to the SpaceX IPO. Five billion. When that kind of institutional money shows up with that kind of appetite, what do you think happens to your allocation as an individual investor?

It gets cut. It gets squeezed. You get the crumbs they feel like leaving on the table, and you are supposed to be grateful for the opportunity to participate. The story about retail allocations being reduced is not a scandal. It is Tuesday in investment banking.

The Numbers Are Not on Your Side

A Wall Street Journal reporter actually did some genuine journalism here and found a finance professor at the University of Florida who has compiled the real historical data on IPO performance. This is not opinion. This is compiled research, the kind the brokerage world does not want on the front page.

The historical pattern of IPO performance for retail investors is not pretty:

• Day one pops reward institutional players who got in at the offering price, not the investors chasing in the aftermarket.
• Lockup expiration selling creates consistent downward pressure at predictable intervals.
• Long term underperformance versus the broader market shows up in a disturbing number of IPO cases when you actually run the full data.

Reality Is Your Best Investment Tool

I do not care how exciting the SpaceX brand is. I do not care how many times you have seen the rocket land itself on a drone ship. The structure of this IPO, like every IPO before it, is designed to benefit the people who built it, not the people buying into the buzz.

Stop letting Wall Street’s marketing department make your investment decisions. The numbers exist. The history exists. Use them.