No Tape to Read: A Note on the SpaceX Listing

Tonight, after the bell, the bankers will hand the market a number. One hundred and thirty-five dollars a share, and a company priced at one and three-quarter trillion — the seventh-largest concern in the country, ahead of Tesla itself, before a single share has changed hands in public. Some five hundred and fifty-six million shares, better than seventy-five billion dollars raised in a night. Tomorrow the rocket-maker opens on the Nasdaq under the letters SPCX, and the whole crowd will lean toward it at once. I have seen this leaning before. It is the oldest sound on the Street, and it has never once changed its tune.

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A price handed down, not discovered

A speculator’s first question is never what is it worth? It is what is the tape telling me? — and here there is no tape. A stock that has never traded has no history, no record of accumulation or distribution, no proven trend. There is no pivotal point to wait for, because the market has not yet drawn one. The figure quoted tonight is not a price the market discovered through the honest argument of buyers and sellers; it is a price the underwriters fixed and carried on the road, a number handed down rather than tested. I made my money standing aside until the market itself signaled the line of least resistance, then sitting once it had. A first-day issue offers me nothing to stand on and nothing to sit on. It is all hope — and hope is one of the four standing enemies of every man who speculates: greed, fear, hope, and ignorance. They empty more accounts between them than any panic ever did.

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You may own the shares; you will not steer the ship

Read the filing past the headline and you find the thing that should matter most to a man parting with his capital. After the offering, the founder keeps better than eighty-two percent of the voting control. You may buy the shares. You will not steer the ship, nor check the man at the wheel, nor be consulted when he changes course — and this is a man who changes course. Daniel Drew taught Vanderbilt that lesson in the Erie war: he printed fresh stock faster than the Commodore could buy it, and Vanderbilt went on paying good money for paper that was being watered under his feet. The mechanics are cleaner now and the lawyers more careful, but a share that carries the full price of ownership and almost none of its say is not the bargain the prospectus makes it sound. The control stays exactly where it has always been.

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Ask who is selling, and why now

There is a question the crowd never asks in its enthusiasm: who is on the other side of this trade? Somebody is selling me these shares, and it is worth knowing who, and why, and what they understand about the price that I do not. They are selling because the demand is loud, the figure is rich, and the moment is theirs to choose. This is not new. When Morgan’s syndicate needed to place three-quarters of a million shares of U.S. Steel in 1901, they did not ring a bell and announce it to the public. They engaged James Keene to feed that block into an eager market quietly, routed through a broker’s name that hid the Morgan hand — distributing at the top while the public believed it was buying into strength. The clothes are better cut today and the thing is called a roadshow, but the direction of the paper has not reversed in a century and a quarter: it moves from the people who hold it to the people who want it, at the hour that suits the holder.

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What the patient money does

Set all this against the men and women who kept their fortunes rather than merely made them, for keeping is the harder trick by far. Bernard Baruch, the Lone Wolf, moved out of stocks into bonds and cash and gold years before the 1929 top, and when a pool came to him asking that he help prop the market up, he declined — and he kept what he had. Hetty Green, whom a jealous Street called a witch for the sin of prudence, put it plainest: she bought when things were low and nobody wanted them, she held until they rose, and she never once bought on margin in her life. Neither of them ever chased the loudest issue on the board on its opening morning. They understood what the impatient never learn — that cash is itself a position, and frequently the strongest one on the table; that the operator who must always be holding something is the operator who is always wrong somewhere. It was never the buying or the selling that made the big money. It was the sitting. And a man cannot sit on a stock that has no seat yet to take.

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The verdict

Understand me plainly: this is no call to sell the rocket short. I do not short a thing merely because the crowd has fallen in love with it — that is the very same blunder as buying it, worn inside out. The market is never wrong, and in its own time SPCX will tell its story on the tape. It will trade in earnest, find real buyers and real sellers, carve out a range, and one day declare a line of least resistance clearly enough that a patient man may act on it and sit. That day is not tomorrow. Tomorrow is the spectacle, and the spectacle is staged for the crowd, not for the speculator. So let the issue trade. Let it find its level without your money riding inside it. Let the first sellers sell to the first dreamers, and let the price prove something on its own account before you ask it to prove something for yours. The hottest issue on the board is always the one with the shortest history behind it, and a speculator trades the history, not the heat. Keep your capital in your pocket and your eye on the tape. The rocket will still be there the day it finally hands you a reason.