Is Space X Crashing?

The shares plummeted on their first day of trading on the Nasdaq-100 stock index

Friends,

Today, on their first day of trading on the Nasdaq-100 stock index, SpaceX’s shares dropped 6.8% to $149.47. That’s above their IPO price of $135, but down from a peak above $200, and below the $150 price where shares began trading on June 12.

SpaceX’s decline disappointed investors who wagered that inclusion in major indexes would provide a boost to the shares.

But, what about all the Americans who didn’t even know they were buying into SpaceX, but whose savings are in index funds linked to SpaceX and the Nasdaq-100? They’ve been taken for a ride.

On May 1, the Nasdaq 100 implemented a new “fast entry” rule that included companies among the top 40 most highly valued in the U.S. — which put SpaceX on board automatically.

The result: A big chunk of Americans’ retirement savings and pensions (as well as university endowments) are now automatically tied to SpaceX’s market value.

At the same time, all that automatic infusion of investment was expected to jack up the value of SpaceX, at least in the short term.

If today’s launch is an indication, that didn’t happen.

SpaceX insiders — such as Musk and, reportedly, senior Trump officials — can sell their shares sooner than is usually the case with an IPO, because that’s the way the SpaceX IPO has been structured. Which means they can enjoy the stocks’ upward tide as the major indices have essentially forced millions of investors to buy it, and then they can still exit SpaceX before the tide runs completely out.

If this sounds to you like a Ponzi scheme, it does to me, too. SpaceX may turn out to be the universe’s biggest Ponzi scheme — with the possible exception of Trump meme coins.

Of course, the Nasdaq’s overall weakness today didn’t help. Weighed down by semiconductor stocks, the Nasdaq composite fell 1.2%. The S&P 500 dropped 0.4%. The Dow Jones Industrial Average slipped 0.2%.

But investors have been nervous about SpaceX for weeks. The rocket company started to veer off course with a report out on June 22 that, notwithstanding all the hoopla surrounding its IPO’s raising $85 billion in its first trading days, SpaceX wasn’t really flying all that high.

In fact, it was floating a $20 billion bond sale to refinance its debts (mostly from its acquisition of X, on which Musk had put a lofty valuation). The sale seemed to go well initially, but the bonds dropped in the secondary market to a degree rarely seen by investors, driving up their yield premium (or spread) to U.S. Treasurys.

So SpaceX investors are now confronting several big unknowns, including how much cash SpaceX will burn and how much borrowing it will do going forward.

Which means average Americans who hold their savings in index funds are flying blind, even if they don’t yet know it. They may even be lost in space.