Space X breaks the stock market, Wall Street institutions blindly sing, many are questioned by the market
On the 25th day since its listing, the optimistic ratings and price forecasts issued by Wall Street investment banks collectively triggered widespread doubts in the market. With the intensive release of bullish reports by investment banks, the company's stock price has recently fallen below the initial issue price (IPO price) of US$135, and once dropped to around US$125, causing the first batch of allotted investors to face book losses. As the largest initial public offering in U.S. history, after SpaceX went public in June this year, its stock price soared to a high of $211 per share in about three trading days, but then entered a downward channel, and its current market value has shrunk by nearly 60% from its highest point. However, 17 of the 23 Wall Street investment banks participating in the underwriting of the listed company jointly issued bullish multi-year price forecasts after the ban was lifted. Data shows that the above-mentioned 17 institutions have set a median target price of $225 for the company within 12 to 18 months. Among them, Raymond James Financial Company (Raymond James) gave the highest target price of US$800, and Stifel Financial Company (Stifel) had the lowest target price of US$190; , Deutsche Bank and other institutions price closely around the median. In the report, Morgan Stanley hailed the company’s business ecosystem as “the ultimate frontier of artificial intelligence.” It claims that it is "laying a super highway to the stars." In response to the nearly unanimous optimistic forecasts from Wall Street institutions, financial scholars and analysts pointed out that investment banks’ calculation models tend to be divorced from fundamentals and follow mechanical blindness. Jay Ritter, a professor at the University of Florida and an expert in the field of initial public offerings, pointed out that because the current financial situation of Space Exploration Technology Corporation lacks a clear path to profitability, analysts tend to mechanically superimpose a huge increase on the existing price and imitate each other to avoid deviating from the mainstream. Ritter emphasized that investment banks’ valuation logic is based on extremely radical assumptions. If calculated based on the median price target, the company's market capitalization would need to expand by another US$1 trillion from the level before the release of the forecast, to a staggering US$3 trillion. Financial data shows that Space Exploration Technology's revenue in 2025 will be less than US$19 billion, but its net loss will be as high as US$4.9 billion, with a valuation-to-market ratio of 105 times. Market analysis points out that in order to support US$3 trillion and even higher valuations that may be derived in the future, the company must reverse the current high capital expenditure of US$5 for every US$4 in revenue in a very short period of time, and achieve a profit scale that exceeds that of most current technology giants. According to public information, Five large multinational investment banks, Morgan Stanley, JPMorgan Chase, Citigroup and Bank of America, took about 85% of the issuance. In this fundraising totaling US$75 billion, the underwriter group received a total of US$500 million in underwriting fees. Analysts generally believe that huge interest relationships are the core reason why investment bank analysts choose to collectively conceal potential valuation risks and publish highly homogeneous long-term reports.