The investing world is anxiously awaiting an IPO by SpaceX, the company that revolutionized launches into near-earth space by developing rockets whose first stage returns to the earth after launch and is reusable. This is the company founded by Elon Mush whose stated goal is to colonize Mars. SpaceX is a profitable company that launches eighty percent of all US satellites, takes crews to and from the International Space Station and makes money from its Starlink satellite internet network. Until now stock in this company has not been available to the average investor but now it will. Should you buy stock in SpaceX? Here are a few thoughts on that subject.
What Is Space X?
SpaceX or Space Exploration Technologies was founded in 2002 by Elon Musk with the stated goal of making space launches more affordable and eventually colonizing Mars. Although SpaceX has not yet reached Mars it is the world’s most valuable private company (about $800 billion), is the world’s leader for launches into near earth space, earns about $13 billion a year with more then half of that coming from its Starlink space-based internet service and is a leading user of artificial intelligence to fine tune rocket performance during launches and reentry.
How Dependent Is SpaceX on Elon Musk?
To a large degree an investment in SpaceX, just like Tesla, will be an investment in Elon Musk. Musk not only founded SpaceX but play a leading role in its continued operations by providing financial backing and making critical operational decisions. To the extent that Elon Musk becomes stretched too thin with Tesla, X (formerly Twitter) and other activities like helping Donald Trump get reelected president, such a situation could materially hurt SpaceX operations and profitability. Whenever the head of a company leaves the helm and someone new takes their place investors are commonly concerned about competence, effectiveness, and profitability under new leadership. This ought to be a significant concern with Musk who is 54 years old and, according to his biographer, subject to “crippling” stress, a heavy drug user and diagnosed with Asperger’s Syndrome (autism spectrum) which is characterized by difficulty with social interactions, repetitive behaviors and restricted interests. Musk if known to hold control of his companies very tightly and has, through his efforts, become the richest man in the world. Many who invest in Tesla and will want to invest in SpaceX once it becomes public will simply be investing in Elon Musk. Anyone following this course of action should be concerned about the stability and predictability of the leader they are following and investing in.
Should You Buy the SpaceX IPO and at What Price?
As noted by Bloomberg, SpaceX will pursue an IPO in 2026 and likely raise more than $30 billion. If predictions are accurate this will be the biggest IPO ever even surpassing the Saudi Aramco IPO. Musk’s company is promoting a company valuation of $1.5 Trillion for this IPO. A fair estimate of the value of an IPO share of SpaceX is about $110 but this is based on an evaluation of total SpaceX value of $210 Billion and not $1.5 Trillion. It is useful to remember that Tesla stock has often sold for more than one might rationally believe to be its fair market value because so many Tesla investors believe that Elon Musk will create more and more value for them over time. To the extent that you believe that Musk will stay healthy, not be diverted from running the company by too many outside interests, and generate more and more income, the $110 projected stock price may be a steal. To the extent that Musk falls down the X, politics or other rabbit holes and this affects his judgement and company management investment in SpaceX at any price will depend other people than Musk picking up the slack and maintaining SpaceX operations.
What Will You Be Investing in if You Buy SpaceX Stock?
There are rumors that Musk will merge SpaceX with Tesla and even xAI before an IPO. Such mergers would complicate the picture for the IPO even though it would greatly increase the value of the eventual company. If this were to happen the issue will more and more be whether or not you are investing in Musk more so than evaluating the fundamentals and intrinsic value of the eventual company.
Will Musk Colonize Mars?
Remember in all this that Musk believes that humanity needs a “plan B” to be accomplished by putting people on Mars. He may or may not succeed in this task but anyone who is interested in SpaceX investment needs to consider how much effort will be devoted over the years to generating income for SpaceX investors and to what degree assets will be moved into efforts to put folks on the red planet! If the latter is something you want to sign on to, good for you, but do not confuse altruistic goals with solid investment decisions when deciding whether or not to buy stock in the SpaceX IPO.