I notice that my “pension” pot’s gone up a lot this morning, presumably because I made 20% profit on the biggest bet I ever took (or should I say my pension provider took for me).

Well I asked for my money to be invested in equities, with geography determined by the market size for what I wanted (shares that didn’t invest in companies benefiting from fossil fuel).

So my pension is largely invested in technology companies in America which are listed on American stock markets. I presume that one of my largest holdings is in Elon Musk’s Space X and I guess that if you’re reading this, you may be thinking what I think!

I’m thinking “how did I take a massive bet on Space X and will it continue to offer me a healthy return. I am happy to see that Robert Armstrong of the FT has mailed me his thoughts on this and I share them with you.

SpaceX

SpaceX’s IPO, the largest ever both by valuation and size of float, rose almost 20 per cent on its debut on Friday. This is a big deal, but a lot has been written already, so we confine ourselves to two observations.

We haven’t seen anything resembling market pricing yet. Both supply of and demand for the shares are still in flux. On the demand side, waves of price-insensitive demand are coming from index-linked funds in the near future — over $16bn worth within 15 days of Friday, according to BNP Paribas (that assumes a $75bn final float; filling the $11bn “greenshoe” overallotment option will increase the passive buying). That means those who were allocated shares in the IPO could always expect an upward price “squeeze,” especially on the assumption that some buyers are Musk fanboys who will hold on to their shares for dear life. It’s not quite a guarantee of a profit (James Mackintosh of the WSJ explains some of the risks here). But it’s close.

On the supply side, up to 911mn shares held by insiders become eligible for sale the day after SpaceX reports earnings for the June quarter, presumably sometime in mid-July (see the table beginning on page 258 of the prospectus here). If the share price is above $175.50 that day, the ceiling rises to 1.4bn shares. Remember, only 555mn shares were sold in the IPO. Between the second-quarter earnings report and year-end, nearly 3.3bn more shares became eligible for release, with more to follow. Price discovery is going to take a long time.

Pundits are worried about SpaceX, but worries are cheap. The worrying class — that is, my class — has two related concerns about this IPO. One is that it was a massive fix by the finance industry, motivated by a mad grab for fees. This is exemplified by, for example, Nasdaq’s changing its index-inclusion rules to get SpaceX in quickly and in spite of its small free float, and JPMorgan Chase CEO Jamie Dimon’s decision to act as salesperson for the stock. The other is that putting a $1.75bn valuation on a cash-burning company in industries that are somehow both speculative and incredibly competitive is plain crazy.

Fair enough on both points. If SpaceX stock collapses in the next year or so, we’ll have congressional hearings with Musk, bank CEOs and all the trimmings. But everyone knows we are riding high on an investment boom, a stock market boom, and a technological revolution. Saying “all this could end very badly” now will not count as prescience, even if all this does end very badly. It is a costless thing to say, the risks are obvious, the buyers are adults, and there’s no crying at the casino.

[Armstrong]