Episode summary
The $1.75T IPO No One Can Price | 6 Things That Surprised Us This Week
Excess Returns
· · Hosts: Jack Forehand, Matt Zeigler · Guests: Cameron Dawson, Kai Wu, Jim Paulsen, Dave Nadig
Summary
The episode centers on six market surprises: the potential SpaceX IPO, the durability of value investing, a shift in stock-market leadership, and what oil and disruption may be signaling under the surface. The hosts argue that SpaceX is not just a company story but a valuation and market-structure event, because a company that may price near 80 to 100 times sales at a $1.75T scale would require extraordinary growth to justify its multiple. They also stress that the first days and weeks of trading could be unusually chaotic because of thin free float, index buying, options activity, and front-running.
On factor investing, the discussion takes a more nuanced view of value’s “death”: value appears to have worked fine in insulated industries, while it has performed poorly in sectors exposed to technological disruption. That same disruption is creating extreme dispersion in software and other exposed groups, which can generate big winners and losers rather than a uniform outcome. Separately, the market’s recent leadership is shifting toward small-cap tech and unprofitable tech stocks, a change that makes the rally feel riskier. Finally, Jim Paulsen argues that the stock market’s most serious pressure from oil often comes after oil peaks, not while it is rising.
Key takeaways
- Cameron Dawson argues that pricing SpaceX around 80 to 100 times sales implies a very steep growth curve, even for a company of that size.
- The hosts think the SpaceX IPO could create a chaotic first 30 days because of small free float, index inclusion, and forced buying.
- Kai Wu’s framework says value has held up in insulated industries, but has struggled in sectors exposed to technological disruption.
- Jim Paulsen says the recent market feels riskier because small-cap tech and unprofitable tech stocks are leading instead of the Magnificent Seven.
- Kai Wu argues that disrupted software stocks have much wider return dispersion, creating both unusually large upside and downside outcomes.
- Paulsen says the biggest stock-market and economic pain from oil tends to come after oil peaks, not during the rise.
Notable quotes
“when you trade at such a high multiple even if the great news happens what tends to happen is you kind of hit a ceiling mostly of a stock of that size”
“value work just fine as long as it's not in industries that are exposed to technological disruption”
“We're having unprofitable stocks, unprofitable tech stocks in particular, leading the tech world, if you will, overall”
“Having a company this big come to market with such a small float and accelerated index inclusion”
“the market dynamic stuff I find completely unpredictable”
How the episode opens
So it's a word of not necessarily caution but like historical wisdom just to say when you trade at such a high multiple even if the great news happens what tends to happen is you kind of hit a ceiling mostly of a stock of that size.
What you find is that when you apply the value factor in the insulated sectors actually the poor performance has been great been been just fine. You almost see no difference between 2010 on and the beginning period. In other words, value work just fine as long as it's not in industries that are exposed to technological disruption.
We're having unprofitable stocks, unprofitable tech stocks in particular, leading the tech world, if you will, overall. So, Mag 7's not only getting beat by small little no-name companies, it's also getting beat by companies without any profits. And that's that changes the feel of this thing.
Welcome to the ExS weekly rap. I'm Jack Forehead, joined as always by my good friend Matt Ziggler. Matt, how's it going, — Jack? I am I am up to my eyeballs in macro and IPOs. And what a what a week. The price of oil. Kaiwoo breaking down value again. I just embarrassment of riches. Adnauseium every time we do one of these.
And we we've got some great stuff. We've got some great clips. We're going to do something a little bit different this time.
We're going to shorten this up. We're going to keep this episode around a half hour. And we're going to focus on the things that sometimes in these episodes there's things we hear and you know we hear a lot of things because we interview a lot of people.
Sometimes we hear things that were like, "Wow, that is surprising.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- spacex ipo valuation
- index flows and market structure
- value investing amid tech disruption
- ai disruption and software dispersion
- oil price impact and lagged pressure
Companies and tickers mentioned
- PLTR
- SpaceX
- Palantir
Watch the episode
Watch “The $1.75T IPO No One Can Price | 6 Things That Surprised Us This Week” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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