On planet finance, cash takes on the role of gravity. When the field is strong, valuations stay grounded. When it weakens, they drift off into a dizzying lightness that feels like flying but means falling.
This week, the market provided several pieces of evidence: the biggest IPO in history, the world’s richest companies raising capital, an AI company warning about its own product and still aiming to go public. A look at a week in which almost everything pointed upwards and gravity briefly but clearly returned.
There is a planet that appears on no map of the solar system, though it holds more inhabitants than most countries and runs a weather system entirely of its own. On Planet Finance the force that does the work of gravity is cash. Earnings pull a price down towards something solid, the discount rate sets the strength of the field, and a dividend is a body with mass. When the field is strong, valuations orbit close to the things that are supposed to justify them. When it weakens, they drift. This week the field weakened almost to nothing, and for a few days the planet enjoyed the sensation every astronaut describes on first reaching orbit, the giddy lightness of having nothing beneath one’s feet. The difficulty with weightlessness is that it is not flight. It is falling, arranged so tactfully that no one notices until the floor comes back.
The largest object ever launched
The emblem of the week is, fittingly, a rocket company. SpaceX is to list on Nasdaq on 12 June at around 1.75 trillion dollars, raising some 75 billion, which makes it the largest initial public offering in recorded history by a margin that is almost impolite. The previous record, Saudi Aramco at 29.4 billion in 2019, is not so much beaten as lapped. The number is real and the superlative is earned, and yet it says less than it seems to. A record denominated in dollars is in part a statement about dollars, and the dollar has spent the past century being printed with some enthusiasm.
Measured against the money already in existence, or against the output of the economy doing the measuring, the largest flotation in history is not a new event. In 1987 the privatisation of Nippon Telegraph and Telephone raised the equivalent of 36.8 billion dollars and briefly made NTT the most valuable listed company on earth. Shares were rationed by lottery and oversubscribed many times over, because a nation had decided that the future had arrived and could be bought by the slice. It was the largest offering of its day, and within two years the bubble it helped to inflate had crested and begun its long descent. The record was a fact about money, not about the company. It usually is.
The richest companies, passing the hat
Beneath the rocket sits a stranger spectacle. The enterprises that generate more cash than any in human history have spent the spring asking strangers for more. Alphabet, which produces around 174 billion dollars of operating cash a year, has just raised roughly 85 billion in equity and a comparable sum in debt to help fund a capital programme of 180 to 190 billion this year, with a promise that next year will be larger still. Meta is reported to be preparing a share sale in imitation. Across the four largest builders, capital expenditure is on course to consume about 94 per cent of operating cash flow, against under half only two years ago.
This is the quiet inversion the headlines miss. A business that must issue both equity and debt to fund its own investment is not confessing that it is poor. It is admitting that the thing it earns, however enormous, is no longer the binding constraint on what it intends to spend. Money has gone weightless at the source. It no longer needs to be earned before it is committed, only raised.
The official language for this is unprecedented demand, contracted backlog, investment from a position of strength. The behaviour says something plainer. A company genuinely confident in its own cash machine does not stop buying its shares and start selling them, which is precisely what Alphabet has now done after two decades. The words and the cash flows are pointing in opposite directions, and on Planet Finance it is always the cash flows that are believed in the end.
A day the field switched back on
For one session, gravity returned. On Friday the Nasdaq fell 4.18 per cent and the S&P 500 lost 2.64 per cent, the worst day since the spring of last year. The proximate cause was almost comic. The American economy was reported to have added 172,000 jobs in May against an expected 80,000, a figure several economists attributed in part to hiring for a football World Cup that begins next week. A sporting tournament, in other words, helped to tighten financial conditions, because a hot labour market makes it harder for a new and untested central bank chairman to cut rates at his first meeting, now days away. Strength was read as danger, which is the surest sign that prices had been built on the expectation of ever cheaper money.
The chips led the fall, and here the irony is sharpest. Broadcom had just reported artificial intelligence chip revenue up 143 per cent, total revenue up 48 per cent to a record, and a forecast for the current quarter higher again. Its reward was a fall of about 13 per cent, because the chief executive declined to raise his full-year target and conceded that the largest customers would buy from more than one supplier and that the fastest-selling products carried the thinnest margins. A company was punished for growing at 143 per cent because the price had already assumed more. When more than doubling is treated as a disappointment, expectation has left the atmosphere, and a body that has left the atmosphere has only one direction left in which to travel.
The confession and the prospectus
The week’s most elegant artefact came from a laboratory rather than a trading floor. Anthropic, one of the leading artificial intelligence companies, published a note warning that its systems are approaching the point at which they might improve themselves with little human help, and proposing that the world preserve the option of slowing or pausing the development of the most powerful models. It is a serious argument, made by serious people. It also arrived in the same week the company filed, in confidence, to go public at a valuation near a trillion dollars. A warning about the danger of the product, issued by the seller, on the eve of the sale. Sceptics read it as the digging of a moat, the purchase of permission to operate while the race itself continues at full speed. Whichever it is, it belongs to the same family as the rocket and the equity raises: a story about the future, deployed to move capital in the present.
Who is still in the air
Set the week side by side and a single pattern emerges. Every protagonist is a seller. Alphabet sells equity, Meta prepares to, SpaceX sells the largest slice of itself ever offered, Anthropic files to sell what remains private. They are all issuing into a market whose cash has been drawn down to pay for the very listings they are racing to complete, which is why, when one of them stumbled, they all fell together. That is not a coincidence of mood. It is what weightlessness looks like from the inside, a great many bodies floating in the same direction, each convinced it is rising.
The history is not subtle. The largest flotation always feels like an arrival and tends, in retrospect, to have been a departure. NTT was the future of 1989, the South Sea Company was the future of 1720, and both are now studied chiefly as warnings. None of this dates the present enthusiasm, which may run for years and may yet be vindicated by revenue that genuinely turns up. The point is narrower, and older. On Planet Finance the question is never whether gravity returns. It is only who is still in the air when it does, and how far below them the ground has quietly moved while they were admiring the view.
Eric Lefebvre
Read also: Have Western economies had their Kodak moment (II)?
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