When, and if, to make SpaceX public?

The head of Space Exploration Technologies Corp. (SpaceX) Mr. Elon Musk warned employees of the wide swings in the stock market in an email dated 2013. and in it, the executive covered several topics, including fears that the company is not targeted by short sellers and operating costs. At the time, SpaceX had just launched the Falcon 9, and the company’s partnership with the National Aeronautics and Space Administration (NASA) was in its infancy.

The letter reveals Musk’s thoughts on conducting a public offering of SpaceX shares, and when combined with the company’s current plans, shows how he might not have the complete luxury of choice in the matter. .

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The eight-year-old email provides insight into SpaceX’s operating costs at the time and Musk’s rationale for not listing the company’s shares on the public market. Rumors and speculation about a SpaceX Initial Public Offering (IPO) are rare these days, but they’re not absent either. These days, they focus on the company’s Starlink satellite constellation, operated by a subsidiary of SpaceX, and rumors often speculate that it is selling shares of its internet subsidiary to the general public.

In his email, Musk explained to SpaceX employees the volatility present in the stock market and how it would add to the risky nature of SpaceX’s business. In 2013, the company was developing the second generation of its Falcon 9 launcher. This vehicle, dubbed the Falcon 9 v1.1, took off in September 2013 and featured several upgrades such as new engines and more thrusters.

When the email was sent, SpaceX was also recovering from a scare involving its Dragon spacecraft. The company’s second Dragon spacecraft, which docked with the International Space Station (ISS) in early March 2013, developed problems that initially seemed severe enough to compromise the mission, but successfully became the first commercial vehicle to deliver unpressurized cargo to the space station. .

Importantly, Musk also points out that it would be impractical to make SpaceX public before he has developed a transport system capable of Martian missions. He associates this decision with the risky nature of the company’s product development, explaining that everything “anomaly on the rocket or spacecraft” would have “result in severe punishment” in stock exchange.

Like him declared:

Elon Musk now owns less than half of SpaceX’s shares

It’s also not correct to think that because Tesla and SolarCity’s prices are high right now, SpaceX would be too. Public enterprises are judged on quarterly performance. Just because some companies are doing well doesn’t mean all would. Both of these companies (Tesla in particular) performed very well in the first quarter. SpaceX didn’t. In fact, financially speaking, we had a terrible first trimester. If we were public, the short sellers would hit us in the head with a big stick.

We also got beaten up whenever there was an anomaly on the rocket or spacecraft, as happened on Flight 4 with the engine failure and Flight 5 with the Dragon prevalves. Delaying the launch of V1.1, which is now over a year behind schedule, would result in particularly severe penalties, as it is our main driver of revenue. Even something as minor as pushing a launch back for a few weeks from quarter to quarter spanks you. Tesla vehicle production in the fourth quarter of last year was literally only three weeks behind schedule and yet the market response has been brutal

SpaceX’s Starship and Starlink projects will require billions of dollars in investment

He also pointed out that SpaceX’s spending during the year would be between $ 800 million and $ 900 million and that the company would have to launch at least a third of its missions for NASA or with the Falcon Heavy to be even slightly profitable. .

However, perhaps his starting comments are the most important because they indicate that the executive may be willing to go public with SpaceX once it develops its rockets capable of conducting missions to Mars.

Musk begins the letter by stating:

Based on my recent comments, I’m increasingly concerned that SpaceX will go public before the Mars transport system is in place. Creating the technology necessary to establish life on Mars is and always has been SpaceX’s fundamental goal. If being a public company decreases this likelihood, we shouldn’t do it until Mars is secure. It’s something I’m willing to reconsider, but, given my experiences with Tesla and SolarCity, I’m hesitant to impose audiences on SpaceX, especially given the long-term nature of our mission.

This “transport system” is the SpaceX Starship launcher system, currently under development in Boca Chica, Texas. The company has performed several Starship test flights with the vehicle’s upper stage, and is preparing the entire rocket, with the lower and upper stage, for an orbital test flight pending the environmental audit of the Federal Aviation Agency (FAA) of its launch. facilities.

According to comments made in December of last year, Musk hopes to send an unmanned Starship mission to Mars next year. At the time, the executive advanced its unmanned mission schedule by two years after saying in October that his company hoped to send a mission to the Red Planet in 2024.

The executive’s December statements were as follows:

I think … I feel pretty confident in about six years. So every … Mars … Earth-Mars synchronization occurs approximately every 26 months. So we had one this year, this summer, and that means in about two years or so there will be another, and then two years later. So I think, I would say if you say six years from now I would be very confident, if we’re lucky, maybe four years from now. And then we want to try to send an unmanned vehicle there in two years.

Judging from the email and his latest comments, it looks like a cautious Musk wants to wait until his company can complete missions to Mars before risking stock market volatility.

However, when we look at another part of his email that highlights Tesla and SolarCity “heavy“the structure of private capital and their needs”raise a lot of own funds“, it looks like Musk can see his forced hand.

While in 2013 SpaceX had to deal with “only” the development of a medium transport rocket and spacecraft, with the help of NASA, it currently has to develop the world’s largest rocket and a constellation of satellites with 42,000 satellites. These two are not ready for large-scale income generation and will not be for years to come.

In its most recent fundraiser, the company raised $ 1.2 billion and a contract with NASA provides it with $ 2.9 billion to develop a lunar variant of Starship. However, NASA’s contract is contingent on SpaceX meeting development milestones, with payments currently on hold due to litigation.

Musk estimates that SpaceX will need $ 5 billion to develop Starship, and if he decides to go public, then based on his statements, it will either be when SpaceX needs a lot more capital than it does. he cannot bring them together, either when he is certain that Starship is operational for Mars. Looking at the development costs of both Starlink and Starship, especially with their intertwined destinies, it could be that the former is true sooner than the latter.

Either way, SpaceX’s fate is (perhaps rightly) tied to planetary orbits, with the next Mars launch opportunity approaching in September 2022.