The Biggest IPO in History Is Set to Begin, and It Could Affect Israelis' Savings

This Friday, the biggest IPO in history is expected to hit Wall Street, and the capital markets are buzzing. SpaceX, the space and satellite company, plans to sell only 4% to 5% of its shares, raise $75 billion to $80 billion in the process, and reach an astronomical valuation of $1.8 trillion. SpaceX handles spacecraft and satellite launches and also dreams of settling Mars within a few years. In addition, it operates the global satellite internet network Starlink and recently acquired xAI, Musk’s artificial intelligence company, including Grok, which is integrated into the social network X (Twitter). ● Harnessing the momentum created by institutional investors: the secret to successful new IPO investing ● Down 20%? The figure that is a glaring warning sign for the stock market

But the SpaceX IPO is only the opening shot, and two more giant offerings are expected to follow, on unprecedented scales, led by the artificial intelligence revolution. Anthropic, the parent company of the Claude AI tool, raised tens of billions of dollars last month at a valuation of nearly $1 trillion, and OpenAI also raised funds in March at a valuation of $852 billion. Uzi Levi, head of foreign equities at Mizrahi Tefahot Bank, says this is a test for the entire high-tech sector: “Anthropic and OpenAI want to go public as quickly as possible after SpaceX in order to benefit from the huge hype that is expected. The market expects SpaceX’s IPO to succeed, and that is energizing Wall Street. The market is looking for confirmation that these technologies are worth a lot of money and that institutional investors are willing to buy at these prices. If the IPO is at lower valuations, it is expected to trigger a wave of declines.”

For the pension of every Israeli

Anyone who thought this was a story whose impact would stay overseas is probably mistaken. The entry of the giant companies onto Wall Street is expected to flow into the savings of almost every Israeli through investments in the leading indices on Wall Street. The Nasdaq stock exchange changed the rules to allow SpaceX to enter the index within just 15 trading days, instead of 100 days, and the Russell index company did the same. By contrast, the S&P 500 index provider has not agreed to loosen the rules, for now, which also require at least one year of trading history and profitability for at least four quarters, two conditions that SpaceX is far from meeting.

“Good thing S&P came to its senses and decided to act like the responsible adult in this case and block the fast-track entry,” says Ania Giman, head of the foreign equities desk at Leader Capital Markets. According to her, “a fast entry into the indices would have been very positive for the share price in the short term, because it would have led to passive demand. Now, short-term support will be much smaller.”

Even so, Yuval Bar Even, head of peer investments at Migdal Insurance and Finance, estimates that the company will enter “the S&P 500 index within six months, and there are even talks about a faster track.” Others estimate it will not happen before 2028. “SpaceX’s weight in the indices will be affected not only by market capitalization but also by the amount of float, and that works against it, since only about 5% will be held by the public. In our assessment, the stock’s weight in the S&P 500 will be about 0.22%, in the Nasdaq about 2.5%, and in the MSCI World index about 0.1%. This weight is expected to generate billions of dollars in demand for the stock and affect trading.”

By contrast, Giman of Leader estimates that SpaceX’s initial weight will be 1% in the Nasdaq, and after six months, once all locked-up shares are released, the weight in the Nasdaq index could rise to 3.2%.

But everyone agrees on one thing. SpaceX’s entry, and then Anthropic’s and OpenAI’s, will affect the indices. “The stock’s entry into the indices, together with the expected entry of Anthropic and OpenAI later this year, is expected to create supply pressure on the rest of the stocks, which will have to ‘make room’ for them,” says Bar Even. Giman of Leader adds that SpaceX’s IPO is already affecting the markets. “In recent days we have seen increased volatility, and it is not unlikely that at least some of the interest is connected to the dynamics ahead of the IPO.”

Will Wall Street’s concentration grow?

In recent years, criticism of the concentration of broad indices in the large technology stocks has only intensified, and already today, even before the giant offerings, big tech companies make up about 40% of the S&P 500. For now, one can only estimate that the entry of the three giants onto the exchange will deepen dependence on the sector. A senior market source says the entry of these companies into the indices will also affect Israelis’ savings: “When these stocks enter the indices, they will be held in pension and provident fund portfolios. Most institutions, most overseas holdings, are through broad indices, including the S&P 500 and Nasdaq, so all institutions will have exposure to these three stocks.”

Giman believes, however, that the impact will not be significant. “Israeli institutional investors are exposed to the Nasdaq index, but it is not their main benchmark. A 1% weight in the Nasdaq is equivalent to 0.1% to 0.2% of an institutional equity portfolio abroad, and for some it is an even smaller share of the total portfolio. In half a year or a year, when more shares are released and if the company meets the standards and also enters the S&P 500 index, the weight in the portfolios will increase accordingly. But we are still not talking about dramatic exposure, because the stock’s expected weight in the index is 1% to 2%.”

How does a loss-making company get such a valuation?

SpaceX itself lost nearly 5 billion shekels last year, despite revenues of $18 billion. These alarming numbers are reviving an old fear: has the capital market returned to the days of the dot-com bubble, when loss-making companies were given fantastical valuations?

Uzi Levi of Mizrahi Tefahot does not think this is a bubble: “It is clearly expensive and there is no doubt that the multiples it is getting are high. But according to Goldman Sachs, the company’s revenues are expected to jump from $18 billion today to $474 billion in 2030. So the market is very hyped about this IPO, and if it succeeds, it may pull along all the companies in the satellite and communications indices.”

The senior market source adds that the company is very difficult to value. “If they bring their artificial intelligence to a point where it is profitable, and make their spacecraft and satellite launch capabilities profitable, the valuation could be much higher. I do not price in its dreams of data centers in space or on Mars. That is not something anyone knows how to price.”

According to him, unlike financial bubbles in the past, “this is a real business, one that works and generates revenue, even if it is true that profitability is still far off because of the huge investments in its activities. It is not comparable to small companies in the past that were loss-making and went public on the basis of a presentation. There has never been a company going public at such a valuation, and it is also truly a unique global player, and that is true of Anthropic and OpenAI as well. The revenues of these companies are enormous and growing tremendously, and we have not yet reached the full potential of AI model usage. I estimate there is a high probability that the company will become profitable as early as next year, if not before.”