{"id":29110,"date":"2026-06-16T04:00:00","date_gmt":"2026-06-16T02:00:00","guid":{"rendered":"https:\/\/www.thebrokernews.ch\/?p=29110"},"modified":"2026-06-14T15:42:19","modified_gmt":"2026-06-14T13:42:19","slug":"planet-finance-the-engine-room-e-lefebvre","status":"publish","type":"post","link":"https:\/\/www.thebrokernews.ch\/en\/planet-finance-the-engine-room-e-lefebvre\/","title":{"rendered":"Planet Finance: The Engine Room"},"content":{"rendered":"
Planet Finance: Where your bill arrives on time.\r\n<\/span><\/div>\n\n

The financial market has no patience. While the economic chassis can hide a bad decade behind fine words, the engine punishes every mistake immediately\u2014sometimes in a single afternoon. Oracle was punished for its best quarter ever, SpaceX celebrated the largest IPO in history with a disappointingly modest price jump, and gold fell just when it should have risen. This column explains what these signals have in common and why the bill always arrives on time in the financial world. <\/strong><\/p>\n\n

Last week, this column described the financial world as a planet whose gravity is cash, leaving it weightless, drifting in a dizzying lightness that feels like flying yet signifies a fall. It concluded with a question: When gravity returns, who will still be in the air, and how far will the ground have receded beneath them? <\/p>\n\n

Gravity returned within a few days, and it\u2019s worth watching closely where it lands. Previous columns on economic structure have examined the economy\u2019s chassis: energy, bonds, debt, government bonds, and the immovable pillar of taxation. The chassis is slowly drifting along. A country can mismanage itself for a decade before the bill comes due, and the bill rarely lands on the desk of the one who signed it. With the engine, it\u2019s different. The financial market evaluates everything else, and it has absolutely no patience. It corrects a miscalculation within quarters, sometimes in a single afternoon. This column was the warning. The following days showed what the engine does when the field starts up again. <\/p>\n\n

A record quarter, punished<\/strong><\/h6>\n\n

Let\u2019s start with the clearest-cut case. Oracle<\/a> reported the best quarter in its history, and the market sold off the stock. The numbers weren\u2019t weak. Operating cash flow reached a record $32 billion for the year, an increase of more than 50 percent. The order backlog\u2014that is, contractually agreed-upon but not yet realized revenue\u2014swelled to $638 billion, an increase of more than 363 percent over the previous year. Eighteen months ago, a quarter like this would have put the CEO on the cover of a magazine. <\/p>\n\n

The stock fell by about 10 percent. The reason lay in the footnotes, where such reasons are always to be found. Free cash flow for the year was negative at nearly $24 billion. Capital expenditures rose by 162 percent to nearly $56 billion, exceeding the company\u2019s own forecast. And to continue expanding, Oracle announced that, in addition to the $48 billion it had already raised over the course of the year, it would raise another $40 billion in debt and equity. The market did the math, which the press release avoided. A company can have the largest order backlog in its history and still be a machine that consumes capital faster than it flows back through growth. <\/p>\n\n

Two details deserve closer examination. More than half of this record order backlog comes from a single customer. And a large portion of it isn\u2019t a sale in the traditional sense at all. According to Oracle\u2019s own figures, about $75 billion of this consists of advance payments from customers for the chips or the customers\u2019 own procurement of the chips, which, as the company notes with almost gratitude, reduces the capital it needs to raise. An order backlog that makes for flattering headlines while simultaneously acknowledging that the manufacturer cannot finance the construction on its own is a special kind of order backlog. The order book is real. So is the hole beneath it. <\/p>\n\n

The same confession, only smaller<\/strong><\/h6>\n\n

If Oracle is the prime example, then Supermicro<\/a> is the same admission on a smaller scale\u2014and precisely because it is smaller, it is all the more revealing. The company had received orders worth around $39 billion for AI servers from more than 20 customers but did not have the cash on hand to purchase the components needed to build them. So it announced a $7 billion capital increase, causing its stock to drop by about 28 percent in a single trading day. <\/p>\n\n

The key detail to keep in mind is found in the company\u2019s own statement, which notes that the orders do not constitute firm commitments and are subject to cancellation. Read that again in light of the financing arrangements for these orders. The order backlog is subject to cancellation. The dilution is permanent. And consider the instrument. Since the benchmark interest rate is nearly 4 percent and the market no longer expects a decline, even a company that would have taken out loans in the past has instead turned to equity. That is the step Alphabet took in May when it raised $85 billion in shares for a company that prints money. From the world\u2019s largest balance sheet down to an insignificant server manufacturer: the approach is now identical. Sell off part of the company to buy the parts. What the company earns is no longer enough to finance what it has promised to build. <\/p>\n\n

The broadcast<\/strong><\/h6>\n\n

On Friday, the whole affair reached its climax. SpaceX<\/a> went public in New York with a valuation of around $1.75 trillion, raising approximately $75 billion in the process. It was the largest initial public offering in market history. What\u2019s interesting about this isn\u2019t the rocket. It\u2019s the mechanism that links this single listing to nearly every portfolio in the country. <\/p>\n\n

An index has rules, and those rules have been rewritten for this occasion. The Nasdaq now allows a company ranked among the top 40 by market capitalization to be included in its flagship index after 15 trading days, rather than the usual waiting period of several months. It has dropped the minimum free-float requirement and applies a multiplier that values a free float of $75 billion as if it were more than $200 billion. About $1.4 trillion is invested in this index. Every fund included in it must now buy a stake in a newcomer with low free float and losses, and to raise the money for this, it must sell proportional shares of what it already owns\u2014namely, Apple, Microsoft, and Nvidia. The machine generates its own selling. This was one of the reasons why the chip stocks that had driven the market higher fell so sharply over the past two weeks. They were sold off in part to make room for the rocket-like rise. <\/p>\n\n

One party refused to back down. S&P Dow Jones kept its rules unchanged, requiring that a company must have turned a profit and been publicly traded for at least one year. SpaceX lost nearly $5 billion in 2025. Consequently, the world\u2019s broadest index\u2014which is included in most retirement accounts\u2014will not include the company until it turns a profit. The underlying mechanism is circular by nature. Mandatory purchases drive up the price, the higher price increases the index weighting, and the higher weighting forces further purchases. Diversification, sold to the public as a precaution, becomes a single, synchronized buying spree. <\/p>\n\n

The price surge and what it’s worth<\/strong><\/h6>\n\n

And the stock soared. On Friday, the stock opened at $150, compared to an offering price of $135, reached $176 during the session, and closed at $161\u2014a gain of just over 19 percent on the first day. The largest IPO in history delivered the biggest paper profit on a single trading day. The number to remember is the 19 percent itself. <\/p>\n\n

According to data Jay Ritter<\/a> has been collecting for four decades, the average gain on the first day of trading for a U.S. stock market listing since 1980 is 19 percent. The largest initial public offering ever planned yielded a price jump that was exactly in line with that average. The spectacle was historic. The mechanics were ordinary. A small free float met a flood of forced and voluntary purchases, and a small free float behaves exactly as it always does. That is the quietly devastating figure of the week. <\/p>\n\n

This leads to two conclusions, neither of which makes the headlines. The first is that the rise in the share price is a redistribution, not a creation. The difference between the $135 the company received and the $161 the market paid is money that the issuer left on the table and passed on the night before to those who were allocated shares. Over the course of 2025, this windfall amounted to more than $13 billion. The second is that the price jump says nothing about whether the company will earn its cost of capital. Ritter\u2019s long-term track record is clear. IPOs that doubled on the first day lost, on average, about a third of their value. When purchased at the first-day closing price and held for three years, the average new issue lagged behind its competitors by nearly 30 percent. The price movement on the first day is a barometer of sentiment. It is not a valuation. <\/p>\n\n

And according to the prospectus, the business behind the stock ticker consists of two profitable companies and one that isn\u2019t. Starlink<\/a> is the cash cow, with more than $11 billion in revenue last year and a 63 percent margin, and the launch business is a reality. The hole is the AI division xAI<\/a>, which lost more than $6 billion last year. It\u2019s the same kind of weak spot found at Alphabet, a proven cash cow meant to carry an unproven bet. The market has bought into the whole package with a 19 percent premium and will be asking questions in November when the first public financial statements are released. The following chart shows the debut compared to competitors and long-term trends. <\/p>\n\n

\"\"
Results on the first day and during the initial phase compared to the offering price. SpaceX shows only the first day. The dotted lines indicate the average price jumps on the first day from 1980 to 2025 and in 2025. Source: Company data; Jay Ritter, University of Florida. <\/em><\/figcaption><\/figure>\n\n
When insurance stops providing coverage<\/strong><\/h6>\n\n

Gold has entered a bear market and is trading more than a fifth below its spring high. It is tempting to interpret this as a paradox: the metal is falling precisely under the conditions of war and inflation that should actually be supporting it. It is not a paradox. It is arithmetic. Gold is a zero-coupon asset. It pays nothing and promises nothing, and it competes for the same money as a 30-year government bond, which currently yields more than 5 percent. When the safe-haven asset yields 5 percent and the metal yields zero, and cash itself becomes a scarce commodity, the gold owner pays an ever-higher price to hold a hedge. <\/p>\n\n

That is the mechanism, and it can be generalized. In the scramble for cash, the correlation between assets that are supposed to offset each other approaches a value of one, because the marginal seller is the same forced seller everywhere. Much of what has been sold to the public as diversification has always been a single position in various guises. A liquidity crunch exposes them. <\/p>\n\n

The discount rate that’s taking on the storm<\/strong><\/h6>\n\n

Consider all of this in light of a single fact, for it is this fact that turns a series of difficult quarters into a pattern. The largest capital-raising program in the company\u2019s history is being financed at a rising discount rate. Inflation is at its highest level in three years; the market, which expected interest rate cuts at the beginning of the year, is now leaning toward a hike; and the cost of the capital on which the entire expansion depends is moving in the wrong direction at the worst possible moment. <\/p>\n\n

Every capital raise described here\u2014from Oracle to Supermicro to Rocket\u2014is the same bet: that revenue will come in before funding runs out. The discount rate is the gravitational pull of last week\u2019s stock price. It\u2019s currently rising, and the engine is the first place where this becomes apparent. <\/p>\n\n

The impatient part<\/strong><\/h6>\n\n

None of this puts a time limit on the craze. It could continue for years and be validated by actual revenue; in that case, it would be remembered as the largest infrastructure project of our time. That is a real possibility, and the column does not rule it out. <\/p>\n\n

The closer look is the one that holds true regardless. The underlying structure of an economy can hide a bad decade behind a good speech. The engine cannot do that. In a single afternoon, it re-rated Oracle\u2019s footnotes, punished a record quarter, sold off the hedges that were meant to protect against exactly that, and ensured that the market sold itself off to make room for a rocket that closed with an average premium. This series has spent weeks examining the patience of the slow machine\u2014how long a country can drift before the reckoning comes. The engine is the part that has no patience. It is also the part that tells the truth first. Last week, it knocked on the door. In the financial world, unlike in government, the bill arrives on time and on the desk of the person who signed it. <\/p>\n\n

Eric Lefebvre<\/p>\n\n

See also: Planet Finance: Where Weightlessness Puts Everyone in the Red<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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