Introduction: SpaceX Share Price Decline Impacts Musk's Wealth
Good morning, and welcome to our continuous coverage of business, financial markets, and the global economy.
Elon Musk’s net worth could soon dip below the trillion-dollar mark following a significant drop in the share price of SpaceX, which recently went public.
Musk became the world’s first trillionaire this month when SpaceX launched its initial public offering (IPO). However, after a 16% decline in SpaceX’s shares on Monday, his wealth has decreased to approximately $1.1 trillion.
Monday’s share price fall alone erased over $152 billion from Musk’s net worth, according to Forbes estimates. Most investors who purchased SpaceX shares since the IPO on 12 June are now facing reduced gains.
SpaceX shares closed at $156 last night, slightly above the $150 initial trading price on 12 June, but significantly below the record high of $225 reached a week ago. The IPO was priced at $135, so investors remain in profit.
This recent weakness has reduced SpaceX’s market valuation from a peak of about $2.99 trillion to just over $2 trillion as of last night, representing a loss of nearly $1 trillion.
Danni Hewson, head of financial analysis at AJ Bell, commented:
"SpaceX might have seemed charmed after its record-breaking IPO and subsequent rally, but it’s come down to earth with a bump over the past couple of days, with shares at one point falling below the opening price on its market debut.
"Post-IPO stocks often enter a period of volatility as the market gets to grips with the new entrant, some investors rush to cash out, and others assess at what price they are willing to jump in.
"For a stock like SpaceX, a lot of decision making might have been emotional and based on the anticipation of huge leaps forward in space exploration and utilisation, but investing should be something treated with clear eyes and patience, even when such huge numbers are involved."
Additionally, Tesla shares fell 5.8% yesterday amid a broad selloff in technology stocks, particularly in AI and semiconductor sectors.
The Agenda
- 9am BST: IFO survey of Germany’s business climate
- 10am BST: House of Lords Financial Services Regulation Committee hearing on the consumer insurance market
- 10:15am BST: Treasury Committee hearing on the Financial Services and Markets Bill
- Noon BST: US mortgage approvals data
- 3pm BST: US new home sales data for May
Segro has officially rejected a £12.6 billion takeover bid, describing the offer as significantly undervaluing the company.
In a statement to the City, Segro said:
"The Board of SEGRO considered the Proposal together with its advisers and believed that the Proposal was opportunistically timed and sought to take advantage of the clear dislocation between SEGRO’s current share price and its highly attractive underlying business and strong prospects. This has been accentuated by major geopolitical issues which have adversely impacted trading valuations across the UK and European real estate sectors relative to the US REIT sector.
"SEGRO has a clear strategy, supported by a strong balance sheet and a proven operating platform. Momentum is building in SEGRO’s occupational markets and the Company has a large and attractive development pipeline, including an exceptional data centre platform, as well as a long track record of delivery.
"Accordingly, the Board remains very confident in SEGRO’s ability to capture substantial value for its shareholders during the coming years."
UK Bond Yields Falling
The decline in oil prices today is contributing to lower government borrowing costs.
Government bond yields, which are sensitive to inflation expectations, have decreased.
The yield on 10-year UK government bonds fell by 2 basis points (0.02 percentage points) to 4.73%.
Yields on 30-year gilts also declined by nearly 2 basis points to 5.438%.
This reduction in yields suggests that political uncertainty in the UK is not currently increasing government borrowing costs, despite speculation about the next chancellor and potential changes to fiscal rules.
Signs of Economic Recovery in Germany and France
There are indications that the two main drivers of eurozone growth are showing signs of revival, according to colleague Phillip Inman.
The Ifo Institute in Munich published its monthly business confidence index, which improved for the second consecutive month.
Analysts at ING noted that Germany’s leading indicator, the Ifo index, rose to 85.6 in June from 84.9 in May, signaling a gradual return of business optimism.
"Interestingly, not only expectations but also the current assessment component improved in June," ING analysts said.
However, they cautioned that the index remains below pre-war levels, indicating that the German and broader European economies remain in a transitional phase.
Official data is expected to reflect the ongoing negative impact of the Iran conflict and high energy prices for some time. Second-quarter national income figures may show a contraction in German GDP. Nevertheless, the index suggests a resurgence of optimism.
In France, consumer behavior suggests confidence sufficient to reduce savings to maintain spending.
French banks have reported outflows from regulated savings accounts for the fifth consecutive month, totaling €6 billion in withdrawals this year.
Technical factors, such as government reductions in interest rates on regulated savings products, may partly explain this trend, possibly indicating a shift to other saving forms.
However, if French consumers are following the pattern of their US counterparts, who have significantly drawn down savings over the past four months to sustain spending, this could imply that the economic downturn triggered by the Middle East conflict will be mild in France, similar to the US experience.
Oil Price Hits Lowest Level Since Iran Conflict Began
Oil prices have fallen to their lowest point since the onset of the Iran conflict.
Brent crude declined by 1.8% today to $75.59 per barrel, amid ongoing peace negotiations between the US and Iran.
This is the lowest price since 2 March, the first trading day after the conflict started, though still above the pre-war price of $72.48 per barrel.
US Secretary of State Antony Blinken stated yesterday that no nation, including Iran, would be permitted to impose tolls on shipping through the Strait of Hormuz, signaling a firm stance in negotiations.
Neil Wilson, investor strategist at Saxo UK, said:
"A geopolitical risk premium is being unwound as the deal between the US and Iran sees shipping pass through the Strait of Hormuz."
Shares in Airbus declined by 0.5% this morning following an order from European regulators for urgent inspections of 16 Airbus A380 aircraft.
The European Union Aviation Safety Agency issued an emergency airworthiness directive after cracks were discovered in a wing component on some planes.
The inspections will focus on the wing mid-spar, a critical structural element that bears much of the aerodynamic load during flight.
Fifteen of the affected aircraft are operated by Dubai-based Emirates, and one by Australia’s Qantas.
Real Estate Stocks Rally After Segro Takeover Bid
Shares in UK real estate companies are broadly rising following the takeover approach for Segro.
Landowner and developer Harworth’s shares increased by 5.6%, while self-storage firm Big Yellow gained 4%.
Oli Creasey, head of property research at Quilter Cheviot, commented:
"Segro may be the biggest fish in the UK REIT pond, but at a market cap below £10 billion is a minnow compared to Prologis.
"It remains to be seen whether the combination will go ahead - in our view Prologis would be reluctant to increase the offer materially and take it above NAV - but the very fact that it was deemed possible given the company’s pan-European footprint and 460 employees that make it a more complex transaction than its smaller peers means that the entire sector could be back in the shop window for even larger, foreign companies."
Segro Rejects £12.6 Billion Takeover Bid from US Rival
A new takeover battle has emerged in London as UK warehouse landlord Segro rejected a £12.6 billion offer from US competitor Prologis.
Prologis made the offer on 16 June, which Segro’s board unequivocally rejected yesterday.
Segro’s shares surged 15% to 857p each, nearing Prologis’s bid price of 925p per share.
Founded as The Slough Trading Company in 1920, Segro transformed a military repair depot into an early modern industrial estate.
The company experienced significant growth during the pandemic due to increased demand for home deliveries, intensifying pressure on warehouse space.
Technology Stocks Under Pressure Amid Interest Rate Expectations
Following a strong recent performance, technology stocks are facing downward pressure amid rising expectations of interest rate hikes.
These expectations were reinforced last week by Federal Reserve signals.
This scenario poses challenges for AI companies that have issued substantial debt to finance expansion.
Yesterday, SpaceX sold $25 billion of investment-grade bonds to repay a bridge loan taken in March after Musk merged his AI lab, xAI, and social media platform X into the rocket company.
According to Bloomberg, this bond issuance represents the final step in replacing costly debt used to finance Musk’s 2022 acquisition of X, as well as repaying loans and bonds issued by xAI last year to cover rapid cash outflows.
Financial analyst Bill Blain of Windshift Capital observed:
"Congratulations if you successfully ‘stagged’ out of the SpaceX IPO at the $225 top last week.
"Yesterday the reverse-rocket stock briefly broke lower than the $150 post-IPO opening price. The option market is bearish, hinting it could break $100 if the slide continues. There was clearly good money to be made playing the FOMO curve that erupted around the deal, but the secret of any good party is knowing when to bail-out.
"The rapid pump’n’dump performance of SpaceX has triggered a reassessment of the whole Tech market’s value. What is real and what is hype in terms of real costs and achievable profits in AI?"
