Retail investors buy SpaceX in record numbers for new portfolio plan
Retail investors came out in droves for Friday’s SpaceX IPO, and analysts are rebranding the entire tech sector to account for its outsized success. Retail net buying was $117 million for SpaceX stock on its first day of trading, amounting to 56% of all retail purchases in the equities market, according to a Sunday analysis from Vanda Research. Retail investors ended up with larger-than-average 20% of the $75 billion IPO while hedge funds took 10% and institutional investors with a buy-and-hold strategy took 70%, Reuters reported on Monday, citing a person close to the deal. The $117 million of Friday single-stock retail purchases tracked by Vanda is separate from the overall retail allocation, much of which goes through brokerages. That retail enthusiasm was specific to SpaceX and did not reflect a large overall surge in single-stock activity among these Mom and Pop investors. In fact, at just $209.3 million in trading, last week had the lowest amount of net retail purchases of individual stocks since March, 2020, Vanda analysts found. A new cohort of elite companies The targeted zeal for SpaceX is another sign of concentrated interest in the elite mega-cap companies that have been driving performance in equity markets and investment in the broader economy. SpaceX’s initiation into this club, along with forthcoming debuts from frontier software makers OpenAI and Anthropic, is forcing a rebrand of the club itself. The so-called “Magnificent Seven” tech names – Apple , Alphabet , Microsoft , Amazon , Nvidia , Meta and Tesla – are no longer seven in number. “If the last few years were dominated by the ‘Magnificent 7,’ Friday was perhaps the clearest sign yet that investors are starting to focus on what we call the FAB 10 (Frontier AI & Big Tech 10),” Vanda said. The FAB 10 consists of the Magnificent Seven, SpaceX, OpenAI and Anthropic. The last two names are not yet public companies but are both expected to debut later this year at valuations in the high hundreds of billions of dollars. “Together, these companies represent the future of AI & tech that will define the next decade,” Vanda said. Fintech companies on Friday had one of the clearest views into this newly emerging hierarchy among top tech names. “[SpaceX] was 533% above the second most traded stock that day, which was Nvidia on our app,” Leif Abraham, co-CEO of financial platform Public, told CNBC on Monday. “If you put … Nvidia, Apple, Microsoft, Tesla, Meta and Google combined, it still traded more than that.” Chips as a source of funds SpaceX’s popularity could be pulling funds away from other segments of the market that have been popular with retail investors, who have also been sitting on some dry powder. Vanda researchers on Sunday described chip stocks, which saw a huge rally through April and part of May, as “no longer a retail investor’s best friend.” “Semi stocks that once dominated retail buying are increasingly becoming a source of funds for new opportunities,” they said. Despite a larger-than-average retail allocation and huge amounts of hype, SpaceX trading on Friday wasn’t especially volatile and the stock moved higher in after-hours trading. The momentum continued into the Monday session, with the stock rising 11% to top $179 per share in midday trading. Many folks on Wall Street view current valuations in the tech sector as indicative of a bubble, following outsized capital expenditures and lots of investment with as yet unproven returns. That means there is pressure on the new additions to the Magnificent Seven to live up to the hype. If they don’t, it could mean an across-the-board reevaluation of the sector. “Fundamentally, there is a shortage of good uses of capital,” Dan Alpert, founding managing partner of Westwood Capital told CNBC on Friday. “If this very highly hyped set of IPOs doesn’t take off, there’s going to be a reassessment of the values that have been attributed to the tech sector.” Despite the immense interest in SpaceX from retail investors, the cohort’s purchases are just a fraction of the total sales, the majority of which go to institutional investors. SpaceX lowered its allocation for retail investors to around 20% from 30% prior to the IPO, suggesting strong demand from hedge funds, assets managers, venture capitalists and big-money investors. Ron Baron, CEO of asset management firm Baron Capital, increased his holdings in SpaceX from $24 billion to $25 billion on Friday. “We bought another billion on Friday,” he told CNBC . “I didn’t want to get diluted. I wanted a billion dollars to keep our percentage the same.”
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