Title: Smead Capital: IPOs like lottery tickets: many will play, few will win Show: CNBC International Live (Karen Tso segment; "Steve" = fellow guest referenced) Guest: Cole Smead — CEO & portfolio manager, Smead Capital Management Date: 2026-06-10 URL: https://youtu.be/S-Mphaj2z6g Length: 4:44 Note: YouTube auto-transcript as pasted; (mm:ss) cues verbatim. Aired the week of the SpaceX IPO. Garbles: "Karen"=Karen Tso (CNBC anchor).
00:00 It's a It's a fun question. Um, obviously, I think you know the answer, which is we wouldn't. IPOs in general are kind of like playing a lottery ticket. Many will play, few will win. Um, you know, no one forces you to swing at pitches day-to-day as they come to the IPO window versus in the secondary market.
00:19 You have ample opportunity to evaluate businesses. So, what one of the things we've been thinking a lot about is Newton's third law uh uh physics, which is for every action there's an equal and an opposite reaction. So, yes, SpaceX is going public, but where is the capital going to come from? And your point on the passive indexes, they're going to have to sell the largest constituents, which make up uh you know, are made up by names like Google and Meta and Microsoft and Amazon and Nvidia.
00:46 That's where the forced selling will be the biggest. Um, and what's interesting is those companies in many cases either don't have buybacks or have cut their buybacks and are now raising equity capital, as we saw from Google and what we'll see from Meta. So, I I point that out because uh you know, when the public stock markets are IPOing or offering secondaries like this, that's when the dilution of the capital in the common stock market happens and you wake up years later and you always look back to your point on your career and say, "Gosh, man, I wish I would have
01:14 done something then." Well, this is one of those moments, but that that really I don't think is the most important factor. I mean, the question that your guest mentioned before and I think it's a real question. It's a psychological one. Do you believe? And people are painting it as though if you're not an optimist, um you're you're being a fool.
01:33 >> Cole, we have foreseen a very skittish US market, particularly around technology and particularly around the parabolic stocks, those that have had triple-digit returns so far. We've explained some of it away down to the nonfarm payrolls and what the credit landscape may look like in the United States, but do you think some of this reaction is also getting ready for SpaceX, as some say? Is it a market top? Are we freeing up capital for the space sector.
02:00 Do you think that's one of the reasons why the market's turned skittish? >> Well, you got to remember all tops of markets happen when you run out of buyers. Okay? So, to your point, Karen, I mean, the question is when are we going to exhaust the buyers? And if we haven't already exhausted them in, say, the chips move that we just saw here in the recent 6 months, um you know, these IPOs look like they'll probably do a good job of of meeting the exhaustion.
02:24 And then you go through the next period of life, which is okay, now that you ran out of buyers, you got to go through the season where you run out of sellers, and we call those bear markets. And that's just That's the nature of this. There's just really nothing new. Um people treat this like this is something new.
02:37 And this has been going on since the beginning of capitalism. And I would also say, Karen, this is a very normal process. It's really weird to say that. I say normal because, you know, what we studied a lot on is what do these CapEx cycles do? For example, the internet proliferated a lot, but people forget that between the year 2000 and 2002, even though we were going to use way more internet, the capital expenditures tied to building out the internet got cut in half.
03:01 So, are you a believer just determines whether you're a buyer today, whether this technology ends up being what people think it is. And we think it will be large in productivity, but technology paradigms become big because the price always ends up being way cheaper, which means they proliferate. With lower price, demand goes up.
03:20 And I think that's the real pricing model issue that this is having is no one has enough capital. Google's proving that. Everyone needs help funding, which is why they're giving letter of credit to Anthropic. And we're going to use a lot more of this product. It's just going to be at far lower prices, and the chips are probably going to have to do that, too.
03:38 >> But, Cole, the reality is if you look at a lot of strategies, everybody's all in though because they're chasing some momentum, and any diversification trade hasn't worked at this stage. Does that mean diversification won't work in future because we're still chasing momentum? >> Yeah, diversification is an interesting comment at a time like this.
03:57 You know, back in '99, diversification was the Microsoft employee would diversify into Cisco and Oracle and Intel. That was diversification in another mania. So I say that because, you know, most of this capital that's being created in these markets, people are pretty excited about this other stuff. So they're just recycling it into other names.
04:16 But there's 40% of the S&P 500 that's not dealing in a mania. And so we we just come at this from a fish where the fish are. We You know, if you look around the lake, you don't see anyone else fishing, but you're catching fish. That's fine by us. I mean, look look at how good of money's been made in the energy stocks from 1 year ago.
04:34 And nobody's wanted to be involved in that space. And to Steve's point earlier, how is the price of oil not higher and the returns on capital higher? So it's interesting that there's good money being made elsewhere and people don't seem to care.