Andrew here. What does it mean to be a trillionaire? We’ll probably have our first on Friday when SpaceX goes public and Elon Musk’s paper fortune hits 13 digits. But the truth is that nothing has fundamentally changed; Musk was effectively worth the same amount on Thursday.
The milestone is less a measure of one man’s wealth than a marker of our age, in which innovation (and marketing) can create value at almost unimaginable scale and capital markets can concentrate it within a few individuals’ hands. Workers, investors and governments are left to argue over who deserves what.
Two years ago, Warren Buffett wrote: “In no way did I, or anyone else, dream of the fortunes that have become attainable in America during the last few decades. It has been mind-blowing — beyond the imaginations of Ford, Carnegie, Morgan or even Rockefeller. Billions became the new millions.” Now, the goal post is trillions.
Liftoff
Friday is the day: SpaceX will begin trading in public markets after raising about $75 billion (and perhaps more) in the world’s biggest I.P.O. ever, valuing it at nearly $1.8 trillion.
Elon Musk’s rocket and artificial intelligence company shattered norm after norm in the process of going public, and will mint a new class of millionaires — with Musk himself poised to become a trillionaire. The big question now is what Wall Street will look like when the dust settles.
What to watch: SpaceX will probably begin trading around midday, after its underwriters set an opening price that best clears market demand.
A so-called perpetual futures contract tied to SpaceX, seen as a proxy for the company’s real shares, is trading around $175 on Friday morning, well above the $135-a-share I.P.O. price. That bodes well for SpaceX’s stock.
Musk could become a trillionaire on Friday. At $135 a share, the I.P.O. values his stake in the company at about $688 billion and his total net worth at about $970 billion, according to Bloomberg. Even a few dollars’ rise in SpaceX’s share price could propel him into the trillion-dollar club (on paper).
Will SpaceX suck investor capital away from other assets? That’s what some analysts are positing. From a new report by JPMorgan Chase’s private bank:
To buy something new, an investor has to sell what they own. That means existing cohorts of the S&P 500 — and likely the largest weightings — could see temporary selling pressure. This could be driven by index rebalancing and individual investors looking to fund positions in new equity offerings.
(JPMorgan is an underwriter of SpaceX’s offering.)
SpaceX broke the Wall Street mold in many ways:
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The company priced its offering without the extensive market-testing that most issuers tend to do to raise the most money possible from an I.P.O. That said, The Financial Times reports that Musk, who insisted on the $135 price, and his team had informally tested the price before officially setting it.
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The stock’s first-day “pop” may matter far less than it does for most I.P.O.s. Wall Street tends to see big jumps, like LinkedIn’s doubling its offering price, as bad, because it means issuers could have raised more money. But Musk didn’t seem to optimize SpaceX’s debut for maximum fund-raising.
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SpaceX allocated far more stock than usual to individual investors, reflecting Musk’s unique following. (That said, CNBC reported that about 20 percent of the offering was reserved for retail, less than initially expected.) Most companies are wary of selling too much to individuals, believing they’re more likely to sell off shares quickly.
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The company revamped how many major stock indexes work. Sheer interest in the offering drove Nasdaq and FTSE Russell to let SpaceX join their indexes far more quickly than usual, meaning Musk’s company will be in millions of Americans’ investment accounts within weeks.
The implications of SpaceX’s I.P.O. stretch beyond Wall Street. Investors from mainland China and Hong Kong couldn’t participate in the I.P.O., The Times reports. (That probably won’t stop investors there from betting on SpaceX.) OpenAI is likely to impose a similar restriction for its offering.
The rationale behind the geographic ban isn’t clear. But it underscores deepening tensions between Washington and Beijing, especially when it comes to A.I. At the same time, Chinese rivals in satellite internet and A.I. are likely to keep putting pressure on SpaceX.
HERE’S WHAT’S HAPPENING
President Trump taps Jay Clayton to be the new U.S. intelligence chief. Trump said he would nominate Clayton, the U.S. attorney in Manhattan, to replace Tulsi Gabbard as the next director of national intelligence. Trump had named Bill Pulte, a federal housing official without any relevant intelligence experience, as acting director, prompting a revolt from lawmakers. Clayton, a former S.E.C. chairman, appears set for a speedy confirmation.
Pressure builds on central banks as wartime inflation accelerates. The European Central Bank raised its benchmark lending rate on Thursday, the first major central bank to do so since the war in the Middle East sent energy prices surging. The Bank of Japan is expected to follow suit next week. Economists see the Fed holding rates steady at its meeting next week. But traders are pricing in the Fed raising rates by a quarter-point by December after a string of hot inflation and jobs reports. Relatedly, the World Bank on Thursday downgraded its global growth forecast for this year.
LIV Golf’s future appears to be increasingly doubtful. Saudi Arabia’s sovereign wealth fund, which said in April that it would stop funding the upstart professional golf tournament, has reportedly only provided a third of the $600 million it had committed for this year, according to The Financial Times, citing a financial filing and unnamed sources. A funding shortfall adds pressure on LIV officials to find new investors to avoid financial collapse.
chart of the day
Hitting a rare milestone on Day 1
When SpaceX begins trading on Friday, it will join an elite group of companies with a market capitalization of at least $1 trillion. The first to hit the mark was Apple in 2018; 11 more S&P 500 companies have since joined the trillion-dollar club, Christine Zhang reports.
SpaceX is expected to enter the Nasdaq 100 index in early July. But the earliest it could join the S&P 500 is 2027. Where will the company rank in the trillion-dollar club by then?
Oil’s hazy outlook
Oil prices are tumbling this morning, prompting a rally in global stocks and sovereign bonds.
Brent crude, the international benchmark, traded around $86, a three-month low, as President Trump again signaled optimism about a potential peace deal with Iran.
Traders have heard this before, of course, and Iran’s state broadcaster, quoting the spokesman for the country’s foreign ministry, said on Friday that “nothing has been finalized.”
Another concern: Global stockpiles of oil and fuel have fallen to worrying levels. And there is growing concern among industry leaders about the economic fallout from months of supply disruption.
The International Monetary Fund recently projected that global oil inventories would hit a five-year low next month. And U.S. government stockpiles are approaching their lowest level since 1983.
Oil industry executives have privately warned the White House that the dangerously low inventories could squeeze consumers, Politico reported recently. (A White House spokesperson denied that those conversations had taken place.)
But several oil sector leaders are now speaking out:
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“We’re sounding the alarm on these inventories going to record lows,” Mike Sommers, the C.E.O. of the American Petroleum Institute, an industry lobbing group, told Maria Bartiromo of Fox Business last week.
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How high? A worst-case scenario would be $160 a barrel, an Exxon Mobil executive recently warned at an investment conference.
Trump and administration officials have said prices should ease shortly after a deal is struck. Analysts disagree.
“I don’t know how really smart people in the market continue to think this is just like a light switch you can flip,” Helima Croft, the global head of commodity strategy at RBC Capital Markets, told DealBook.
Talking A.I. with the C.E.O. of Uber
Every week, we’re asking leaders how they use artificial intelligence. This week, Dara Khosrowshahi, who leads Uber, told Sarah Kessler that he put a soft cap on token spending. The interview has been condensed and edited for clarity.
How do you personally use A.I.?
I vibe coded my own little productivity app that I call my clarity task manager. It’s not as feature-rich as some of the professional products, but it’s great because it’s exactly what I want it to be.
What have you told your employees about how you want them to use A.I.?
I think it would be a failure for me to tell our employees how to use A.I. We just want them to use it to help make a more effective version of themselves.
We have engineering teams that we’re embedding into our legal, operations and marketing teams to help them imagine what they can build.
It has been a volunteer project, so the engineers usually spend 50 percent of their time with the operations teams. We have had more engineers volunteer than we need. We’re going to start a rotation program that is full time for six months.
You recently set maximums on the amount that engineers can spend on A.I. tokens. How did you get there?
It’s kind of a soft cap. You’re hitting your cap, and you have to make a request to get more A.I. usage.
There’s a cost to these tokens. And we want our teams to be aware of that. These are significant investments that we’re making in our future. We want to remind employees that they should be responsible, just as they are on their T.&E. spending.
Andrew Macdonald, your C.O.O., said recently that it was hard to draw a line between A.I. use and useful customer features. Is that the way you see it?
It’s a matter of timing. Our developers are much more productive today than they were a year ago, if you measure that by the amount of code they’re committing into our code base.
I think what Andrew was talking about is that all of the inputs are improving, but it takes time for that feature to actually show up in the streets of London or New York or Lagos, and for it to have a positive effect on the business.
Is there anything that you’ve tried with A.I. that didn’t work?
I would feed presentations into my A.I. and ask it to summarize and also ask, what are the questions that I should ask in this meeting? I found the questions to be perfectly fine, but it gave me an excuse to be a lazy version of myself and I didn’t like it.
THE SPEED READ
Deals
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Crowe, an accounting firm, agreed to sell a majority stake to KKR and co-investors in a deal valued at nearly $3 billion after private equity funds bought many of its peers. (WSJ)
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A former Moelis investment banker accused of passing information about 22 deals to a global insider trading ring was spared prison time after pleading guilty to a single charge. (Bloomberg)
Tech and artificial intelligence
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Jeff Bezos, whose artificial intelligence start-up Prometheus just raised $12 billion at a $41 billion valuation, says A.I. will usher in “multiple golden ages,” not major job losses. (Techcrunch, FT)
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Google accused a Chinese cybercrime network of using its Gemini A.I. system to create hundreds of fake websites for online financial scams. (NYT)
Best of the rest
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