Back when I was at InvestorPlace, I happened upon some big scandals in the Hong Kong market. (Image from ChatGPT.)
They weren’t advertised as such, and I didn’t write them up that way. One was a financial company called Magic Empire Global. The other was a brokerage and metaverse play called AMTD Digital.
In both cases there were sudden run-ups, big enough to get coverage from CNBC. The quiet bursting of the bubbles got almost no coverage.
While this was happening, stock in real companies with real sales and earnings were languishing. Michael Burry noticed and called the whole market scammy. But I think he failed to connect the dots.
Simply put, the Hong Kong market is rigged. The NASDAQ will be, too. No one is going to trust it in the future, nor should they.
Elon Musk Steals Your Market
This is not a political story. Let’s just follow the numbers. (Image from Gemini.)
When merged into SpaceX, Musk valued xAI (Twitter and Grok) at $250 billion. Then he fired his AI guys because the software was garbage. He had bought Twitter for $43 billion, so it’s obvious the AI stuff wasn’t worth $200 billion or anywhere close to it. You can do that when it’s all privately held, although grabbing $2 billion from Tesla, ostensibly public, sounds a bit shady. (It’s OK because he gets to run it like a private company through control of its board. I avoid it.)
But wait, there’s more.
As a financial writer who calls himself Keubiko wrote last week, Musk is about to rig the whole NASDAQ like it’s Hong Kong through a SpaceX IPO.
The plan is to float 5% of SpaceX, including xAI, at a valuation of $1.75 trillion. That’s trillion with a T. SpaceX consists of Starlink and hope. Hope for a Moon rocket. Hope for data centers in space. The public raise will “only” be $87.5 billion, and the big banks he’s doing this with are considered good for it.
This is coming just a few months after xAI was bought with a claim the whole was worth only $1.25 trillion. Some $500 billion was created on one man’s say so.
There’s more “air” in this thing than the Hindenberg and (get this) it’s a “confidential” IPO. It’s also a dual-class stock. Musk could sell out and still control it.
My word for this is garbage.
The Denouement
But here’s where it gets dangerous. As Keubiko notes, SpaceX stock is going immediately into the NASDAQ 100 index. This means ETFs based on the index (including those you own) will have to buy it, in quantity. These forced purchases will push the stock price up, which will push the market up.
It won’t stay there. Because there’s nothing underneath all this except bluster. When we realize that SpaceX is naked, and it’s inevitable, it won’t just be SpaceX stock that falls. It will be your retirement savings that collapse, because the index funds will be the bag holders.
In other words, you’ll be holding the bag. And once the smoke clears on all this, do you think any international investor is going to trust the NASDAQ, ever again?
No more than Michael Burry trusts Hong Kong.
