Tom Lee's clients think the SpaceX IPO will mark the top of the market. Tom Lee thinks his clients worry too much. Fundstrat charges these people money for this exchange.
The logic goes like this: big IPO equals market euphoria equals time to sell everything and buy canned goods. Lee counters with "enough cash on the sidelines." Cash on the sidelines. The phrase Wall Street uses when they need you to believe someone somewhere is waiting to buy your bags at a higher price.
SpaceX builds rockets. Impressive work. The company also loses Elon Musk money at a rate that would make a defense contractor blush. But the public markets can "absorb" it, says Lee. Absorb. Like a sponge. Or a pension fund that didn't read the prospectus.
His clients are nervous. They pay for research. The research tells them not to be nervous. They remain nervous. This is the entire wealth management industry in three sentences.
Lee's thesis rests on cash sitting idle. Cash that could be deployed. Cash that definitely exists and definitely wants to own a piece of a rocket company trading at whatever valuation investment banks decide sounds reasonable on a Tuesday. The alternative explanation—that his clients are right and large IPOs do tend to mark periods of excess—would require Lee to tell clients to reduce their exposure. Fundstrat does not grow AUM by telling clients to sell.
Elon Musk will ring the opening bell. Tom Lee will appear on financial television. His clients will buy the IPO. Six months later, those same clients will ask Tom Lee why they bought the IPO. Tom Lee will remind them about the cash on the sidelines. The cash that was on the sidelines. Past tense. It's in SpaceX now. Their SpaceX. Trading at a price that rhymes with mistake.
Photo by Sven Piper on Unsplash
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