SpaceX finally went public on the Nasdaq this week, and the City of London is buzzing. The stock surged 40% on its first day, valuing Elon Musk’s rocket company at a stratospheric $180 billion. British tech funds, already stuffed with US equities, piled in. Analysts claim this heralds a new era for UK tech investment. But as a veteran of 20 years in the Square Mile, I smell something rotten.
The narrative is familiar: a blockbuster US IPO triggers a 'halo effect', supposedly boosting London-listed tech stocks. The FTSE 250 tech index did indeed rise 2% on the day. Venture capital firms, desperate for an exit, are peddling the idea that a 'SpaceX effect' will revive London's moribund IPO market. Yet the fundamental question remains: what does a rocket launcher have to do with a British software start-up?
Let us talk about the bottom line. UK tech firms are not immune to gravity. Inflation is still above BoE's 2% target; the yield on 10-year gilts hovers at 4.5%. The government's fiscal incontinence, with net debt approaching 100% of GDP, is crowding out private investment. Meanwhile, capital flight continues: £50 billion exited UK equities last year alone. The idea that a single US stock will reverse this trend is fanciful.
The real driver here is not SpaceX's technology but its hype. Retail investors, burned by crypto and SPACs, are chasing the next big thing. Institutions are playing along because they need to show returns. But mark my words: when the SpaceX share price inevitably hits turbulence, the 'UK tech boom' will prove as solid as a paper rocket.
Central banks are another potential spoiler. The Fed is pivoting slowly, but the BoE might be forced to cut rates prematurely if growth falters. That would fuel inflation all over again. A lower pound could help exporters, but for capital-hungry tech firms relying on imported talent and hardware, it is a double-edged sword.
I am Alastair Thorne, and I have seen this play before. In the late 1990s, every IPO was 'the next Microsoft'. Then came the dot-com bust. In 2021, it was SPACs and 'digital disruption'. Now it is space. The market is efficient in the long run; it will price in the risk. Until then, enjoy the ride. But do not mistake a speculative surge for sustainable growth. The City loves a good story. It just does not always end well.
