Alessio Rastani and Manuel discuss whether buying the SpaceX IPO is a good idea
Alessio Rastani and trader Manuel discuss the risks of buying the SpaceX IPO at launch, drawing on research into tech IPO performance and quantitative trading principles.
Summary
The upcoming SpaceX IPO and whether investors should buy in at launch is the central question of this discussion. Manuel explains that he operates entirely through computerised quantitative systems and would never buy a stock based on narrative or hype — he waits for his system to signal a buy. Alessio cites research showing that tech IPOs typically underperform in the first three to six months after listing, often dropping below their initial price even after an early rally. Both agree they will wait for a better, lower-risk entry point rather than chasing the IPO. Manuel also raises a structural concern: because SpaceX is expected to be immediately included in major indices, fund managers will be forced to buy it, which means selling other holdings — potentially adding selling pressure to an already weakened market.
Key Takeaways
FULL TRANSCRIPT
Should You Buy the SpaceX IPO at Launch?
Alessio Rastani: I want to talk about SpaceX and the IPO, which is going to be released very soon. Here's an interesting point I want to raise, because in the past when we see tech IPOs come out, there often tends to be a lot of volatility and the price typically tends to drop in the initial stages. This happened with a number of launches. There has been research done on this, and my personal view is that I'm very cautious when a new technology IPO comes out. So with SpaceX — what do you think? When the IPO comes on the market, are you going to be a buyer?
Manuel: No, I'm not going to be a buyer. Disclosure: I don't buy on tips or hunches. As a stock picker, one thing is trend following, and that's what we do in these videos. But when it comes to my own stock picks, I do it based on quantitative systems. Everything is computerised. The computer produces the tickers to buy and the tickers to sell. It's all been coded, and I buy and sell religiously — no second-guessing. Most of the time I don't even know what I'm buying.
For instance, did you know, Alessio, that I had Micron — it reached 14% of one of my portfolios — Micron Technology — and I did not know it was in my portfolio? I was reading the news and I saw something about Micron and I thought, "Wow, lucky people who bought Micron." And then one day I look and I see I have MU in my portfolio. I thought it was something to do with dairy. But no, it was in my portfolio. And I had to rebalance because it had grown so large that I had to trim it down a little.
So what I mean is that when I do stock picking, I have no idea of the stocks I'm buying or selling — I just get tickers. So to answer your question: no, I'm not going to buy SpaceX. I will buy it when my computer system says it's a buy, and then I will buy it. And when it's time to sell, I will sell it. I don't buy on hype.
Alessio Rastani: So you're not one of those people who, as soon as the IPO comes on the market, just goes ahead and buys it. I think a lot of people do that.
Manuel: There are many ways to make money in the stock market. You don't have to chase names or stories. If it's a buy, don't worry — your trading system, whether it's quant or charts or whatever method you use, will one day tell you this is the sweet spot. And then you will buy a ticker. You won't be buying "SpaceX" — you won't care about the narrative. You'll be buying a ticker. And when the chart or your quant system says sell, you sell the ticker. You shouldn't follow narratives.
A stock portfolio is like a team. You don't care much about who's going to score — the issue is that it scores. That's it. We won the World Cup. Period.
Research on Tech IPO Underperformance
Alessio Rastani: The studies that have been done on tech IPOs in general have shown that in the first three to six months approximately, these stocks tend to underperform. In other words, they don't do very well. Even if initially they rally — sometimes a stock may come on the market and initially do well — but overall, over the next several months, the next six months after the initial rally, they tend to drop and actually go below the initial price levels.
That is why I'm rather skeptical. And I'm going to do the same thing as Manuel — I'm not just going to jump in. This video is by no means a recommendation to buy or sell any stock. We're not telling people they should or shouldn't buy. This video is purely for educational purposes. All we're saying is that based on our experience and on the charts in general, it's not something we consider to be a wise thing to just jump in as soon as the stock comes on the market. Personally, I would much prefer to apply some method before I consider buying.
So as far as SpaceX is concerned, I'm going to remain cautious until I see a better opportunity. I think Manuel feels the same — you're going to wait until you see a better opportunity where the risk can be controlled to some extent.
Manuel: And furthermore, it's like a team — I will never buy one name, even if I had the best chart in the world. That's not the way you trade stocks. You have to have at least a portfolio of 20 to 25 ideas at minimum to diversify risk. So I really don't care about SpaceX. It's just going to be a ticker.
SpaceX Index Inclusion and Market Pressure
Alessio Rastani: There's something you mentioned to me earlier — can you say that again? About fund managers being forced to allocate SpaceX into their portfolios?
Manuel: Yes — they will be forced to do that because SpaceX is going to be included in the index. I think they've bent the rules slightly so that it will be immediately included in the indices. That means that ETFs like SPY and others must include the new ticker if it belongs to the S&P 500, the NASDAQ 100, or other indexes.
This means two things. First, they need liquidity. So they need to sell other holdings just to rebalance — to make room for the new stock. I may be wrong because I don't know the future, but I think this is going to put pressure on an already weakened market. They will have to sell Nvidia and other names just to make room for the new ticker that must be in the index. So I think this is not good for the market. And furthermore, the market is already facing headwinds. This could be the last needle that broke the camel's back — not necessarily for a bear market, but for a correction.