7 ms·

I've been told the following (obviously negative) narrative. Can someone verify/refute some of these? I've put (?) next to questionable claims. 1. Twitter is p

by hliyan 4mo ago

I've been told the following (obviously negative) narrative. Can someone verify/refute some of these? I've put (?) next to questionable claims. 1. Twitter is purchased with debt 2. Debt is transferred to xAI via acquisition of X/Twitter 3. Debt is further transferred to SpaceX via acquisition of xAI 4. SpaceX IPO offered at extreme valuation 5. Index fund inclusion rules waived for SpaceX IPO: profitability requirement, inclusion period cut from 90 to 5 days 6. Index funds are largely held by passive investors such as pension funds. 7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?) 8. Holders of original X/Twitter debt (banks) incentivized to support the rule waiver since post IPO, SpaceX will have liquidity to service/pay the debt. 9. Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?) 10. SpaceX is in Texas jurisdiction, where shareholder lawsuits are not possible and must instead go for arbitration. (?)

Npovview 4mo ago
We Uncovered a Hidden Wealth Transfer in the SpaceX IPO. You're Holding the Bag. https://youtu.be/sYA-z0Y8WRQ https://youtu.be/sYA-z0Y8WRQ There is video explaining the process
- alexp2021 4mo ago
  Thanks. That's pretty shady and grim :(
- killbot5000 4mo ago
  I’ve always suspected the “index funds are the safest investment” system is ripe for exploitation.
  - riffraff 4mo ago
    if you're invested in a broadly diversified index you can be annoyed by this thing, but it won't impact you a lot. E.g. if you owned something based on MSCI ACWI, which is free float weighted and global, SpaceX will end up being less than 1% of your portfolio even at a trillion dollar valuation. It's just NASDAQ which is complicit in this scam by overweighting SpaceX.
  - rtkwe 4mo ago
    It was much safer before the indexes decided to throw off all the safety hurdles designed to make sure stocks were relatively healthy and the price was reasonably well settled before they were included. And the core idea that a random investor probably can't reliably pick stocks that will out perform the broad indexes is probably going to remain true, even at the high evaluation SpaceX is a relatively small piece of the total index, it's just disasterous for public trust to see the safe guards thrown down like this imo.
- jhallenworld 4mo ago
  See also: https://www.youtube.com/watch?v=IHD8BDFYyGI https://www.youtube.com/watch?v=IHD8BDFYyGI
ashdksnndck 4mo ago
The twitter debt is a negligible portion of the money at stake here. It’s a footnote compared to the trillions of dollars in wealth that are moving around. We are only talking about it because the internet commentariat has special interest in twitter. Not worth wasting time thinking about it if you are deciding how to allocate your portfolio. Nevertheless it is part of a pattern of weird deals in Elon’s companies. He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross.
- collabs 4mo ago
  Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always based on "vibes"? Was VOO never safe? Was it always possible for the people in charge of the stock market to simply include some money pit into our retirement funds? I feel like the people responsible for these decisions must fear life in prison or this will keep happening.
  - BoredPositron 4mo ago
    It's inherently about him because he is the one behind these changes.
  - bsenftner 4mo ago
    It was never safe, he's exposed the system's design was never intended to be safe for anyone but those in charge.
    - dabidab 4mo ago
      This. People are locked in their 401k and penalized when taking it out says a lot about what it is. People should honestly read Killing the Sacred Cows it’s an eye-opener for anyone invested in 401k.
      - brianwawok 4mo ago
Arn_Thor 4mo ago
> 7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?) Correction: index funds don't have a choice. They must follow the index, and so must buy the stock. side effect: they'll have to sell other stocks, pushing their prices and weighting in market cap weighted indexes down. > Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?) For some active investors, yes. For passive investors (say you through your employer's pension fund), the tax isn't the problem. It's that the market has such a short time to adjust the price of these companies before indexes are forced to include them--and so might buy them at wildly inflated prices. Then, not too long after, the early investors can sell at still-high prices as soon as their lockup periods end. It's a massive transfer of wealth from pension funds and index investors to the early investors in those companies.
- conartist6 4mo ago
  Mmmm legalized theft: the new Tech Industry!
- bluGill 4mo ago
  > Correction: index funds don't have a choice. They must follow the index, and so must buy the stock. Maybe, most indexes do not have to follow the index. they just need to match the returns. An index fund manager has choice of what stocks to buy. However an index fund doesn't have enough managers to make many choices and so they normally buy just what is in the index. However all index fund managers know they are large enough that if they change their holdings "instantly" when the index it self changes the market will collapse and so the fund will under perform. Thus index fund managers are always trying to figure out what the index will do so they can start buying/selling stocks in smaller amounts before the change happens. How each fund handles this is up to the managers. (and "total market" funds have less ability and need to do this)
  - gitfan86 4mo ago
    The whole point of index funds is that you don't have to pay management fees to managers. It's very expensive to hire a team of people to analyze the entire stock market in detail and chose the best 500 companies, and historically people who did that on average didn't beat the S&P500. Just look up the performance of Mutual Funds vs S&P500.
jhallenworld 4mo ago
Also: Musk's shares have 10x voting power, he can not be overruled by anybody (he will retain ~80% of the votes). Also: SpaceX debt is $20 billion.
WarmWash 4mo ago
All the big banking players are in on this IPO Morgan Stanley, Goldman Sachs, JPMorgan, Bank of America, and Citigroup They all know how idiotic Tesla investors are, and they all want those idiots to pick up their bags.
posted-just 4mo ago
[dead]
coredog64 4mo ago
> Index funds are largely held by passive investors such as pension funds. Pension operators are not typically passive. It's a different story to say that maybe they should be given that their returns don't always match up with index funds.
- rtkwe 4mo ago
  They still hold a fairly large amount of money in index funds "about 19.2 percent for public pension plans and 11.2 percent for corporate plans" [0 (2015)] That's a significant sum of money that will be forced into purchasing SpaceX well before it normally would be. [0] https://www.nytimes.com/2015/03/04/business/pension-funds-trail-individuals-in-embracing-index-funds.html https://www.nytimes.com/2015/03/04/business/pension-funds-tr...
HWR_14 4mo ago
6. Pension funds tend not to exclusively hold index funds. Individual retail investors do in their 401ks or personally. Pension funds tend to be fairly sophisticated and can easily insulate themselves from SpaceX/OpenAI/Anthropic if they want either by owning index funds and shorting the other companies or by not purchasing the stock. Also, pension funds are immune to (9) as taxes are handled differently for them. 7. ETF managers that track an index aren't allowed to put discretion into what they buy. They offer much lower fees because they don't have to do any thinking, just executing on an algorithm. 8. SpaceX servicing the X/Twitter debt isn't really a question. The total amount of debt is equal to about one year of revenue at the moment, and it's under 3% of the expected market cap of SpaceX. It's less than a third of what SpaceX's IPO is expected to generate selling new shares to the public. It's a non-issue. On the other hand, the fees the banks will get for the IPO could easily convince them to support the rules waivers. 9. This is true of some passive investors. It is not true of pension funds (which are usually not passive) or 401ks or other tax-advantaged retirement accounts. It is likely to be partly true for any individual depending on how much of their assets is in a tax-advantaged account vs a regular account. 10. Yes to Texas. It seems like the arbitration part is likely to be true (SpaceX is certainly claiming it in the prospectus), but there is not the certainty of having a long history of litigation. Returning to 2+3: The rolling up of all other private Musk companies into SpaceX certainly impacted the investors in those companies, and how much Musk owns vs other people. But the equity adjustments there would be interesting, not the debt.
- PaulDavisThe1st 4mo ago
  > can easily insulate themselves from SpaceX/OpenAI/Anthropic if they want either by owning index funds > ETF managers that track an index aren't allowed to put discretion into what they buy. I detect a contradiction here.
  - HWR_14 4mo ago
    Pension fund managers are not ETF managers. They both buy securities in a fund, but that's about the extent of the similarities.
  - 4mo ago
deaton 4mo ago
The twitter purchase was "only" 44 billion dollars. Thats a lot of money, but compared to the apparent valuation of the xAI branch of ~1 trillion (based on SpaceX being considered ~800B valuation last funding round), the vast majority of the new value seems to be coming from xAI, which is the least profitable of the labs spending on that scale. So its probably worse than that.

by hliyan 4mo ago

Npovview 4mo ago

We Uncovered a Hidden Wealth Transfer in the SpaceX IPO. You're Holding the Bag. https://youtu.be/sYA-z0Y8WRQ https://youtu.be/sYA-z0Y8WRQ There is video explaining the process

alexp2021 4mo ago
Thanks. That's pretty shady and grim :(
killbot5000 4mo ago
I’ve always suspected the “index funds are the safest investment” system is ripe for exploitation.
- riffraff 4mo ago
  if you're invested in a broadly diversified index you can be annoyed by this thing, but it won't impact you a lot. E.g. if you owned something based on MSCI ACWI, which is free float weighted and global, SpaceX will end up being less than 1% of your portfolio even at a trillion dollar valuation. It's just NASDAQ which is complicit in this scam by overweighting SpaceX.
- rtkwe 4mo ago
  It was much safer before the indexes decided to throw off all the safety hurdles designed to make sure stocks were relatively healthy and the price was reasonably well settled before they were included. And the core idea that a random investor probably can't reliably pick stocks that will out perform the broad indexes is probably going to remain true, even at the high evaluation SpaceX is a relatively small piece of the total index, it's just disasterous for public trust to see the safe guards thrown down like this imo.
jhallenworld 4mo ago
See also: https://www.youtube.com/watch?v=IHD8BDFYyGI https://www.youtube.com/watch?v=IHD8BDFYyGI

ashdksnndck 4mo ago

The twitter debt is a negligible portion of the money at stake here. It’s a footnote compared to the trillions of dollars in wealth that are moving around. We are only talking about it because the internet commentariat has special interest in twitter. Not worth wasting time thinking about it if you are deciding how to allocate your portfolio. Nevertheless it is part of a pattern of weird deals in Elon’s companies. He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross.

collabs 4mo ago
Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always based on "vibes"? Was VOO never safe? Was it always possible for the people in charge of the stock market to simply include some money pit into our retirement funds? I feel like the people responsible for these decisions must fear life in prison or this will keep happening.
- BoredPositron 4mo ago
  It's inherently about him because he is the one behind these changes.
- bsenftner 4mo ago
  It was never safe, he's exposed the system's design was never intended to be safe for anyone but those in charge.
  - dabidab 4mo ago
    This. People are locked in their 401k and penalized when taking it out says a lot about what it is. People should honestly read Killing the Sacred Cows it’s an eye-opener for anyone invested in 401k.
    - brianwawok 4mo ago

Arn_Thor 4mo ago

> 7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?) Correction: index funds don't have a choice. They must follow the index, and so must buy the stock. side effect: they'll have to sell other stocks, pushing their prices and weighting in market cap weighted indexes down. > Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?) For some active investors, yes. For passive investors (say you through your employer's pension fund), the tax isn't the problem. It's that the market has such a short time to adjust the price of these companies before indexes are forced to include them--and so might buy them at wildly inflated prices. Then, not too long after, the early investors can sell at still-high prices as soon as their lockup periods end. It's a massive transfer of wealth from pension funds and index investors to the early investors in those companies.

conartist6 4mo ago
Mmmm legalized theft: the new Tech Industry!
bluGill 4mo ago
> Correction: index funds don't have a choice. They must follow the index, and so must buy the stock. Maybe, most indexes do not have to follow the index. they just need to match the returns. An index fund manager has choice of what stocks to buy. However an index fund doesn't have enough managers to make many choices and so they normally buy just what is in the index. However all index fund managers know they are large enough that if they change their holdings "instantly" when the index it self changes the market will collapse and so the fund will under perform. Thus index fund managers are always trying to figure out what the index will do so they can start buying/selling stocks in smaller amounts before the change happens. How each fund handles this is up to the managers. (and "total market" funds have less ability and need to do this)
- gitfan86 4mo ago
  The whole point of index funds is that you don't have to pay management fees to managers. It's very expensive to hire a team of people to analyze the entire stock market in detail and chose the best 500 companies, and historically people who did that on average didn't beat the S&P500. Just look up the performance of Mutual Funds vs S&P500.

jhallenworld 4mo ago

Also: Musk's shares have 10x voting power, he can not be overruled by anybody (he will retain ~80% of the votes). Also: SpaceX debt is $20 billion.

WarmWash 4mo ago

All the big banking players are in on this IPO Morgan Stanley, Goldman Sachs, JPMorgan, Bank of America, and Citigroup They all know how idiotic Tesla investors are, and they all want those idiots to pick up their bags.

posted-just 4mo ago

[dead]

coredog64 4mo ago

> Index funds are largely held by passive investors such as pension funds. Pension operators are not typically passive. It's a different story to say that maybe they should be given that their returns don't always match up with index funds.

rtkwe 4mo ago
They still hold a fairly large amount of money in index funds "about 19.2 percent for public pension plans and 11.2 percent for corporate plans" [0 (2015)] That's a significant sum of money that will be forced into purchasing SpaceX well before it normally would be. [0] https://www.nytimes.com/2015/03/04/business/pension-funds-trail-individuals-in-embracing-index-funds.html https://www.nytimes.com/2015/03/04/business/pension-funds-tr...

HWR_14 4mo ago

6. Pension funds tend not to exclusively hold index funds. Individual retail investors do in their 401ks or personally. Pension funds tend to be fairly sophisticated and can easily insulate themselves from SpaceX/OpenAI/Anthropic if they want either by owning index funds and shorting the other companies or by not purchasing the stock. Also, pension funds are immune to (9) as taxes are handled differently for them. 7. ETF managers that track an index aren't allowed to put discretion into what they buy. They offer much lower fees because they don't have to do any thinking, just executing on an algorithm. 8. SpaceX servicing the X/Twitter debt isn't really a question. The total amount of debt is equal to about one year of revenue at the moment, and it's under 3% of the expected market cap of SpaceX. It's less than a third of what SpaceX's IPO is expected to generate selling new shares to the public. It's a non-issue. On the other hand, the fees the banks will get for the IPO could easily convince them to support the rules waivers. 9. This is true of some passive investors. It is not true of pension funds (which are usually not passive) or 401ks or other tax-advantaged retirement accounts. It is likely to be partly true for any individual depending on how much of their assets is in a tax-advantaged account vs a regular account. 10. Yes to Texas. It seems like the arbitration part is likely to be true (SpaceX is certainly claiming it in the prospectus), but there is not the certainty of having a long history of litigation. Returning to 2+3: The rolling up of all other private Musk companies into SpaceX certainly impacted the investors in those companies, and how much Musk owns vs other people. But the equity adjustments there would be interesting, not the debt.

PaulDavisThe1st 4mo ago
> can easily insulate themselves from SpaceX/OpenAI/Anthropic if they want either by owning index funds > ETF managers that track an index aren't allowed to put discretion into what they buy. I detect a contradiction here.
- HWR_14 4mo ago
  Pension fund managers are not ETF managers. They both buy securities in a fund, but that's about the extent of the similarities.
- 4mo ago

deaton 4mo ago

The twitter purchase was "only" 44 billion dollars. Thats a lot of money, but compared to the apparent valuation of the xAI branch of ~1 trillion (based on SpaceX being considered ~800B valuation last funding round), the vast majority of the new value seems to be coming from xAI, which is the least profitable of the labs spending on that scale. So its probably worse than that.