SpaceX Hit $2 Trillion Losing Billions

On Friday, the largest IPO in stock market history began trading.

SpaceX priced at $135 a share the night before, a valuation of roughly $1.77 trillion, and raised $75 billion in the offering, the largest IPO ever by a wide margin.

The company did $18.7 billion in revenue last year and lost more than $4 billion doing it. It set the price take-it-or-leave-it.

Retail investors were handed roughly 20% of the deal, far more than the 5% to 10% a typical IPO leaves for the small guy.

Then it opened near $150, ran as high as $176 intraday, and closed at $160.95, up about 19% on the day.

At that close, the company was worth roughly $2.1 trillion, more than $300 billion above where it had priced the night before. At its high it briefly cleared $2.3 trillion.

By the closing bell, on its first day as a public stock, SpaceX was the sixth most valuable public company in America, worth more than Meta and more than Musk's own Tesla.

In a single trading session, a company that lost billions of dollars last year added more than four times the cash it raised in the largest IPO ever assembled. Elon Musk became the first trillionaire in history.

Let me be fair to the company before I say anything else.

SpaceX is an extraordinary business. Reusable rockets that land themselves, a satellite network that reaches places no cable ever will, and now an AI division folded in on top.

They changed their industry in a way almost nobody believed was possible twenty years ago. But I am not writing about the rockets.

When the biggest capital raise ever assembled is a company losing $4 billion a year, priced at a number you either accept or walk away from, and the bankers go out of their way to pull the small investor into the deal, you are reading the temperature of the market.

That is what the late innings of enthusiasm look like.

I have watched this movie for decades now, and the plot rarely changes. The names and the technology are new every cycle. The mood at the top is pretty much the same every time.

Euphoria and Panic Are the Same Mistake

Most people think the danger in a market priced like this one is buying the hype. They are half right.

The other half shows up in your own account, on the position that is down and red and makes you sick to look at. Euphoria and panic feel like opposites. They are the same decision made by mood instead of by work.

One has you chasing a two-trillion-dollar company that loses money because everyone around you is excited.

The other has you dumping a good company at the bottom because the number turned red, and somebody on the internet is yelling that it is over.

I nearly watched our readers make that second mistake in real time.

Three months ago, I published our portfolio. One of our positions, our memory-chip pick, was sitting there underwater, down about 18% from where we bought it.

I got the emails… Why are you still holding this? When are you going to admit it is broken?

I held. Today, that position is up more than 139%. It has more than doubled from our entry, after spending some time in the red.

I held because the business kept doing exactly what I bought it to do, while only the price had turned against us. When it doubled, I did something specific: we sold half, pulled our entire original stake back off the table, and let the rest run on house money.

That is the discipline that protects you when sentiment runs this hot. You take the gift when the crowd finally hands it to you, and you arrange things so you can never give back more than you put in.

Three Questions Before I Hold or Cut

Here is the test I run on every red position before deciding whether to hold or sell. You can use it today on anything in your own account.

First question: is the underlying business still doing the thing I bought it to do?

Look at revenue, margins, backlog, customers. If the company is executing and only the price is down, that is noise. If the company itself is deteriorating, that is a signal.

Second question: did the original reason break, or did only the price break?

Write down why you bought it. If that reason is still true, a lower price is a sale and not a verdict. If the reason is gone, the price is telling you something, and you should listen.

Third question: did I size it so that being wrong is survivable?

A position you cannot afford to be wrong on will force you to sell at the worst possible moment. Size is what lets you hold through the ugly part without your stomach making the decision for you.

And one line keeps patience from rotting into stubbornness. Every position needs a number, set before you buy, that means you were wrong and you exit. We call it a stop. Without it, "long-term conviction" is just the story you tell yourself the whole way down.

A newsletter that only shows you green is hiding the part that makes the green believable. So here is our red: we have a few open positions down right now, the worst by about a third. I plan for that.

Our winners run several times larger than our losers, and that asymmetry is the entire game. The same test decides which reds I hold and which I cut.

In our first year, we reviewed every position that pulled back, sold when the reason broke, and waited when only the price did.

The discipline runs in both directions. The test that tells me to hold a good company through an ugly drawdown is the same test that tells me not to touch a two-trillion-dollar company losing four billion a year because the ticker is new and the room is excited.

Process beats mood. Every market eventually reminds you why.

What This Means for Your Money

I just handed you the whole method. The three questions, the stop, the reason we hold and the reason we cut. Run it today on every position you own.

What I left out are the names. We are holding three positions in the red right now, and Premium members are about to watch each one go through that same test: the company, the reason we are holding and not adding, the price that would tell us we were wrong, and the date this summer that settles it.

You are entitled to see the record before you trust any of that. Every position we have closed has finished green, with no realized losses to date, and our average closed winner has run better than 70%.

Seven of our open positions are riding right now on house money, which means we already sold enough to pull our entire original stake back out, so the cost basis on what remains is zero, and every dollar above it is profit.

Among the positions still open, one of our names is up more than 300%, our memory-chip pick is up more than 139%, and our silver position and the miners beside it are up triple digits.

The red belongs on the same page: some positions are down, the worst by about a third.

That is the whole portfolio, winners and losers together.

Over the next two months, all three of our red positions reach the moment that decides them.

An earnings print at the end of July. A set of drill results is expected to be released throughout the summer. A churn headwind on the third that finally rolls off.

I will report back on every one the day the answer arrives, and Premium members will know what each test said while it still matters enough to act on.

Double D

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