Elon Musk’s SpaceX is poised to have the largest stock-market debut in history when it holds its initial public offering on Friday. SpaceX is aiming to raise as much as $75bn in the listing, more than twice the previous record holder, at a valuation of at least $1.8tn, according to a Bloomberg report.
The IPO is expected to be a market spectacle as investors get a chance to buy into Musk’s vision to create a combined space and AI powerhouse. His long list of growth plans — including putting data centers in space — are hugely ambitious but also come with high costs, significant risks and could take many years to come to fruition.
Even though SpaceX generates significant cash flow, largely from Starlink, its satellite-based internet broadband service, the company requires a lot more money to fund its biggest ambitions. The public filing unveiled on May 20 stated that IPO proceeds will be used, among other things, to expand the company’s AI computing infrastructure, enhance its space infrastructure and rockets and boost its satellite constellations.
SpaceX could have opted to continue raising capital in private markets rather than going public. But the company’s funding needs appear to have risen substantially with the acquisition in February of xAI, which is burning through around $1bn of cash per month to cover the cost of computing infrastructure including training its AI models, according to people briefed on the company’s financials.
In addition to its rocket launch business, SpaceX owns Starlink, which has become the company’s main cash flow generator. Following the all-stock acquisition in February of xAI, SpaceX also owns Grok, a money-burning operation whose flagship product is an AI assistant. X, the microblogging site previously known as Twitter, rounds out its portfolio of businesses.
A listing for SpaceX to raise as much as $75bn would shatter the previous record set by Saudi Aramco’s $29.4bn IPO in 2019. The big question is whether a valuation as large as $1.8tn can be sustained in public markets. Analysts value companies based on their future earnings and growth, as well as industry competition and profit margins.
But valuation isn’t a pure science. Especially in bullish market conditions, investors are sometimes prepared to pay up for a company’s shares based on something other than fundamentals. For SpaceX, the downside of having an IPO is that the company will have to publicly report its financials every quarter and answer to Wall Street analysts and public investors. Its plans also could be disrupted if its stock price is volatile or falls sharply in reaction to bad news.
The public filing has confirmed that Musk tightly controls SpaceX, with 85.1% voting control, mainly because he owns most of the company’s super-voting Class B shares. The filing also revealed a super-voting share plan that would allow Musk, the Tesla Inc co-founder and world’s richest person, to keep SpaceX under his control.
Investors enthralled by SpaceX’s potential and Musk’s track record likely aren’t bothered by this, but it could present problems if something went wrong and investors wanted a change at the helm. SpaceX’s market debut on Friday could also prove to be a hurdle for US stocks as investors worry about possible overexuberance among high-growth technology stocks. ChatGPT maker OpenAI on Monday confidentially filed for a US initial public offering, joining rival Anthropic in a push toward public markets.