With the IPO of SpaceX set to hit the market tomorrow, this would be a good time to take a look at some of the largest IPOs in prior massive bull markets. Though nothing in history other than maybe Saudi Aramcoâs 2019 IPO can even come close to the relative size of the SpaceX IPO, there are still lessons to be learned from the marketâs history.
NCR
100 years, six months, and six days ago, the largest IPO of the Roaring Twenties hit the market. National Cash Register, a manufacturer of cash registers and other accounting and business machines, sold its shares to the public at $50/share, valuing the company around $75M. The largest company at the time, AT&T, was worth a little under $3B.
NCR was most similar to IBM at the time as both companies manufactured and sold business machines. Both companies grew during the decade primarily due to the general growth in business and the growing need for accounting and money management solutions.
The timing of the IPO was classic. The market had been running hot for months. NCR listed right as the automobile group was going parabolic, and just before the Federal reserve raised the rediscount rate by 50 bps. The entire market took a nose dive. High-flying stocks like Chrysler and Hudson Motors cratered. Chrysler fell over 50% from its late 1925 peak. Hudson imploded 70%. The baking stocks, which had experienced their own boom in the prior year, began their long, inglorious demise. General Baking Company went down 75% in a straight line. Continental Baking followed suit.
NCR immediately began to sink within hours of its listing. It fell in lock step with the rest of the market, losing about 30% between January and May of 1926. It ended up trading in a large IPO base for its first two years on the exchange, mostly on low volume. After breaking out of its base in early 1928, it became one of the more liquid speculative favorites in early 1929.
Although its trough to peak move was only about 350%, that was at a time when most traders were using up to 10-1 margin. For a trader who captured just a 10% gain in a stock, it could have been equivalent to a 100% position gain. But after reaching a high of over $140 in 1929, it would fall to just $5 in 1933 â a loss of over 95%. However, by the time of the computer revolution in the 1960s, NCR would be a manufacturer of computers, and one of the âseven dwarvesâ that competed with IBM in the early commercial computing industry. Between 1950-1961, it would rise 2,500% amid the boom in computing.
LU
70 years after NCR went public, one of the largest IPOs of the dotcom era hit the market. Lucent Technologies, LU, came onto the stock exchange valued at around $15B in April of 1996 after raising, a then record amount, of $3B. It was, at the time of listing, the largest IPO in history. For reference, General Electric was the largest company in the market with a market cap of roughly $200B. LU was a large company, but nowhere near one of the largest. At its peak a few years later, it was the worldâs largest telecommunications company.
It was spun out of AT&Tâs telecom infrastructure business. It sold optical/fiber gear, wireless infrastructure, corporate networking and communications equipment, and it even had a semiconductor arm. It was a retail favorite internet infrastructure play throughout the dotcom bubble.
LUâs entrance into the market was very different than that of NCR 70 years earlier. LU rose steadily through early 1998 when it fell vertically by about 50% amid the Russian ruble crisis and fallout from the Asian Financial Crisis.
The trough to peak move on LU was about 1,000% between 1996 and 1999, before imploding 99% to just $0.60 by 2002.
X
While not technically an IPO, US Steel made its debut in 1901 after being organized as a consolidation between several leading steel companies. When it began trading on the NYSE, it had a market capitalization of around $1B, making it the largest company in the world, and the first to reach a billion-dollar valuation.
Again, X had classic timing. When it debuted, the market had been in the largest raging bull market in its history for the prior four years. Steel, iron, railroads, and other industrial stocks were making huge gains. Brooklyn Rapid Transit, nearly 2,000%. New York Air Brake, 1,500%. Missouri Pacific, 1,100%. Atchison, Topeka, & Santa Fe, 1,000%. Colorado Fuel & Iron, 700%.
X began trading just 33 trading days before the Panic of 1901 effectively brought a close to the great bull market that began in 1897. After rising less than 30% from its debut to its high, it had a complete unwind of 55% into the panic before quickly recovering, making a false breakout and breaking down once more. It would continue to decline until it reached $8 in 1904 when it would finally make its first real move of 360% into 1905 amid increased demand from the Russo-Japanese War.
$SPCX shares some similarities with these stocks, but itâs also a completely unique situation weâve never really seen before. Many companies in the late 1890s were formed as giant trusts to consolidate entire industries just like US Steel was. The majority of those companies didn't make great moves until years later.
Only about 5% of SPCX will be floated on the exchange. Demand will likely be high. Supply will be low. Even at such a high valuation, it could be more volatile than the average trillion-dollar stock. It could rip out the gate. But the most likely scenario is that it will need to let out some air before it's really ready to make a tradeable move. But if thereâs one thing the market has to teach us, itâs that anything could happen.
âThe stock market is never obvious. It is designed to fool most of the people, most of the time.â
âJesse Livermore