My assumption has been that IPO’s effectively lead firms to be disciplined through a number of different mechanism which all relate to investors being able to assert themselves and an increased expectation of transparency. This means that there is a pressure towards commercial viability which, I have been assuming, would force firms that had previously been burning capital at a tremendous rate to work towards more tractable operations with implications for product design.
But is the SpaceX IPO potentially going to change these expectations? From the FT: As Wall Street clamours for a slice of the historic deal, Musk has secured special treatment.
In the past, companies had to go through a year-long “seasoning period” to join the main benchmark indices and show consistent profitability. Yet some of the largest have bent to Musk’s will and changed their rules to include SpaceX almost immediately and overlook its significant losses.
SpaceX stands to benefit because tracking funds, owned by millions of people through pension plans and personal portfolios, will be required to mechanically buy billions of dollars of its shares to reflect SpaceX’s prominent place in the indices.
This will help steady the stock price in the volatile post-IPO period. Musk has also sought to turbocharge early trading by carving out the largest-ever retail allocation in response to rampant demand from his online fans.
I’m out of my depth here but two questions occur: will the AI labs be of sufficient size to benefit from the same index-listing dynamics and will there be a comparable demand from retail investors? If so does that mean I’ve been chronically overestimating the enshittification dynamics likely to ensue from an IPO?