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The much-touted Elon-Musk-led Space X IPO has come closer to reality this week with the latest revelation we could see the estimated US$2T (yes, two trillion) dollar launch take off as early as mid-June.
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With the overnight NVIDIA result showing that appetite remains healthy for AI companies (even if NVIDIA had to boost its dividend x25 to 25c), and the Space X IPO encapsulating not just Musks’s respected private space exploration and services company but also his Twitter-borne X AI brand, there’s good reason the IPO is catching eyes.
Especially because it could potentially be the largest IPO in history, a crown formerly boasted by a Saudi Arabian oil behemoth.
But, like every larger-than-life IPO, there will be a lot of questions to be asked. First and foremost among them: is this thing actually worth two trillion dollars?
This finance journalist’s gut instinct is to think no, probably not; and I’d be deeply surprised to learn this isn’t a sentiment harboured in the hearts of the vast majority of market participants and watchers everywhere. Then again, reality is what the market wants to be true, and there are plenty of examples (see: the entire AI trade) that outline the veracity of this cynical claim.
Then there are fundamental issues. As in, the stock’s fundamentals. Because while Space X filed its IPO paperwork overnight, that gave us insight into its finances – and Space X actually posted a US$5B loss last year, despite making nearly US$19B in revenue. It’s also got around US$30B in debt.
The stock’s US$2T valuation comes at an implied value of US$1.75T and then a further offering worth US$75B.
Space X also wants to fast-track onto the NASDAQ100 which would likely mean it is automatically (more or less) added to a vast ecosystem of ETFs, the portfolios of which are governed by formulaic rules around what stocks do and don’t end up on their books.
As for where the company actually generates revenue, right now for Space X, that’s Starlink – its satellite-internet-anywhere product that has been used in warzones and remote villages, but, which is also to the chagrin of astronomers given the satellite network enabling it tends to orbit the earth in long strings that obscure scientific analyses and even interfere with the trajectories of other satellites.
Still, the ethics of wild west orbital regulatory landscapes won’t matter to Wall Street more than dollars and cents. Get this: Starlink makes up 70% of Space X’s revenue base. That does suggest a meaningful competitor entering the space could spell problems.
But there are perhaps other issues which might make people twitchy. Among them being Musk’s massive controlling stake, at over 85%.
That probably won’t concern the legion of cult-like zealots (almost exclusively young men who like sci-fi and love crypto) who have long supported Musk’s every move and dismissed every infraction through Tesla or other brands; that’s to say nothing of Musks’s foray into US politics last year, which ended with an inevitable falling-out with Donald Trump. Which poses its own sovereign risk implications.
This finance journalist could go on, but with big name funds (and other tech giants) in the US likely to support the IPO; with AI fever still palpable and with the Church of Musk bruised but still standing, it’s probable the debut of Space X on Wall Street will be met with the kind of nationalistic fervour we’ve been seeing a lot of from the States lately.
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