SpaceX bond sale paper losses (with Ed Lello)

Bloomberg Intelligence's Robert Schiffman downplays the significance of paper losses on SpaceX's $25 billion bond offering, calling it a 'near-term anomaly.' He notes the bonds are investment grade, trade tighter than Oracle, and the losses are overstated. The broader AI valuation narrative is not at risk.

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SpaceX bond sale paper losses (with Ed Lello)

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Schiffman's dismissal of the bond losses as a 'near-term anomaly' and his view that the broader AI valuation narrative is not at risk suggests a sideways, non-panicked outlook for tech markets in the medium term.

SpaceX's $25 billion bond offering has resulted in paper losses of roughly $35 million. Many fast-money accounts were looking for a quick flip.

Ed Lello
Robert Schiffman

This bond deal is not blowing up. Spreads are wider by 15-25 basis points, which shows you can't make money every day. It doesn't change the overall picture of this investment-grade, stable credit with lots of borrowing capacity.

Everyone is looking for the day AI valuations turn, but we've been to this dance before. Bondholders are feeling a little pain, but I don't think it will last.
SpaceX has an investment-grade rating, on par with big tech, but unlike them, SpaceX doesn't have positive cash flows. Why does that matter?

Ed Lello
Robert Schiffman

Even big tech companies like Microsoft, Amazon, Meta, and Alphabet are free cash flow negative after capex and shareholder returns, which is why they raise so much money. SpaceX is a triple-B name, so it has less flexibility and is a new issuer without a track record.

However, it is rated higher than Oracle and trades tighter than Oracle. It doesn't look or trade like a junk company. These are near-term anomalies from hedge funds trying to make money.

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