Could the SpaceX, Anthropic, and OpenAI IPOs Trigger a 40% Stock Market Crash? Here's What the Data Says.
Yahoo Finance ·
Talk of a potential 40% market crash is popping up in financial headlines these days, and it has enough surface logic to be taken seriously. Space Exploration Technologies Corp. ( SPCX +3.95% ) , best known as SpaceX, just completed the largest initial public offering (IPO) in U.S. history, raising $75 billion at a $1.75 trillion valuation. Anthropic has confidentially filed for an IPO targeting $30 billion at a valuation of roughly $965 billion. OpenAI is expected to follow next year. As exciting as all these big-name IPOs might be, they could also trigger a big drawdown, according to financial commentator Mark Hulbert. Hulbert's analysis draws on academic research by Harvard economist Xavier Gabaix and the University of Chicago's Ralph Koijen, who found that every dollar withdrawn from U.S. equities causes total market cap to shrink by $5. Applied to the roughly $200 billion these three IPOs are expected to raise, that multiplier implies a $1 trillion hit to market value -- and separate GMO research correlating IPO volume with forward returns puts the 12-month decline closer to 40%. Most data makes a 40% crash scenario look unlikely -- while making a more targeted, painful correction in specific pockets of the market look very real.
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