SpaceX’s bond issue sell-off sent shockwaves through global equity markets on Monday after the rocket maker announced a debt offering of at least $20bn (£15.1bn), wiping $350bn from Elon Musk’s personal fortune and dragging markets from Seoul to London into the red.
SpaceX fell 16 per cent to $154, down sharply from its peak of $201 reached just a week earlier, when the stock climbed 25 per cent in the days following its Nasdaq debut on 12 June. Bloomberg described the listing as a record IPO.
Bond Anatomy: Senior Notes and a $29bn Debt Stack
The proceeds from the offering will refinance a bridge loan that accounts for the bulk of SpaceX’s roughly $29.1bn in total long-term debt, according to its Securities and Exchange Commission (SEC) filing as reported by Yahoo Finance. The notes are structured as senior unsecured bonds with maturities spanning five to 30 years. The remainder of the proceeds will fund the company’s artificial intelligence ambitions.
Reuters reported that SpaceX’s bankers were preparing to meet investors as early as the week of 23 June to discuss the transaction, with calls potentially kicking off on Monday of that week.
‘SpaceX can be fairly blamed as the culprit,’ Chris Beauchamp, chief market analyst at IG, told City AM.
Musk’s net worth fell to $1.1tn from $1.45tn following the stock’s decline, according to Forbes calculations. The $350bn drop exceeds the entire net worth of the world’s second-richest man, Larry Page, which stands at just shy of $300bn.
SpaceX Bond Issue Sell-Off Hits UK Investors
The damage spread quickly to London. Shares in Scottish Mortgage Investment Trust fell four per cent to 1,381.62p by midday.
QuotedData reported that SpaceX accounted for 21 per cent of Scottish Mortgage’s £16.9bn fund, a stake valued at approximately £3.5bn. Baillie Gifford had raised its carrying valuation of SpaceX to $1.6tn ahead of the IPO, up from $1.25tn at 30 April, though well above the $780bn fair value Morningstar analysts published that same week.
Baillie Gifford’s US Growth Trust also declined three per cent to 321.78p. SpaceX makes up around 15 per cent of that trust’s portfolio.
‘The selling in SpaceX, as its trajectory starts to reverse following a blockbuster market debut, has had a knock-on effect on some of the UK vehicles with stakes in the business,’ said Russ Mould, investment director at AJ Bell.
The FTSE 100 was down 0.4 per cent to 10,391.72 by midday, led lower by miners. Antofagasta fell nearly seven per cent; Anglo American and Fresnillo each dropped 5.5 per cent. ‘[The blue-chip index] has fallen victim to a broader global retreat in equities as the previous high flyers get hit hard,’ Beauchamp said.
Sage, one of the index’s larger technology constituents, bucked the trend, rising 1.5 per cent to 814.40p.
Continental Europe fared worse. The CAC 40 in Paris fell 0.7 per cent, Germany’s DAX shed 1.1 per cent, and Amsterdam’s AEX dropped 1.4 per cent.
Asia Takes the Hardest Hit
South Korea bore the brunt of the overnight selldown. The KOSPI fell 8.3 per cent to close at 7,484.41, its biggest single-day decline since 4 March, according to Reuters. Circuit breakers were triggered, halting trading as investors moved to cut chip-sector exposure. Reuters noted that fears over US Federal Reserve policy compounded the technology-driven pressure.
Much of the Asian sell-off traced back to Wall Street, where the Nasdaq had closed down one per cent in the prior session after billions were erased from SpaceX and other technology stocks.
With SpaceX bankers set to begin investor meetings as early as this week, how the bond is priced will be the next test for a stock still trading well below its Bloomberg-reported record IPO valuation.
