Musk courts selling investors in record £56bn stock market flotation
Elon Musk has never been one for convention, and his plans for a SpaceX public offering are no different.
The aerospace-to-artificial intelligence conglomerate is preparing to take investors to court on an unprecedented scale as it targets a $2tn (£1.5tn) valuation in what could be the biggest stock market ever attempted.
In a move consistent with Britain’s massive privatization of the 1980s, SpaceX has placed up to 30 percent of its shares with non-professional investors rather than keeping a large portion of the offering from City institutions and the Wall Street bellwethers that usually dominate these deals. The company is banking on Musk’s dedicated following to help it raise $75bn (£56bn) later this year.
Details of the summer show emerged this week after SpaceX told 21 banks it had retained to manage the deal. Analysts at the underwriters’ association will receive their first official briefing on June 7, followed four days later by an event for 1,500 retail investors at a yet-to-be-disclosed location. Shares will also be offered to investors in the UK, EU, Australia, Canada, Japan and South Korea.
Bret Johnsen, SpaceX’s chief financial officer, is understood to have told bankers that retail participation will be greater than in any previous IPO, describing the company’s individual supporters as people who have “been incredibly supportive of us and Elon for a long time”. This approach parallels the way Margaret Thatcher’s government sold British Telecom shares directly to ordinary savers in 1984, giving millions their first taste of share ownership.
Industry observers have compared the excitement surrounding the listing to the chaos surrounding Google’s 2004 launch. The company’s value has soared in recent months, rising from $1.25tn when SpaceX merged with Musk’s Artificial Intelligence venture xAI in February to $1.75tn last month.
Whether that amount can be justified is still a hotly debated issue. George Ferguson, a senior analyst at Bloomberg Intelligence, noted that the only publicly available financial data is top-line income, making accurate estimates difficult. He predicted $20bn in revenue for SpaceX this year but cautioned that xAI, which accounts for only $1bn of that figure, is “the underdog in the AI race right now” and represents a large portion of the overall valuation.
SpaceX made between $15bn and $16bn in revenue last year, with satellite broadband service Starlink and US government and defense contracts and space providing the lion’s share. A full prospectus is expected in late May, when investors will get their first detailed look at the company’s earnings.
Morgan Stanley, Bank of America, Citigroup, JP Morgan and Goldman Sachs led the fundraising, underscoring the scale of the project.
Perhaps the most impressive aspect of the investment case is Musk’s pivot from his longtime desire to colonize Mars to a new, arguably commercial idea: datacenters in space. Proponents argue that solar-powered orbiters could solve some of the Earth’s energy constraints that plague the AI industry.
The concept remains untested, however, and the technical hurdles are enormous. Solar radiation, space debris and the sheer difficulty of transporting and assembling data center components in orbit are all potential challenges that may require advanced robotic systems that do not yet exist. SpaceX’s new Starship rocket, billed as the world’s most powerful launch vehicle, is the centerpiece of the program, although a test launch scheduled for this week has been pushed back to mid-May.
Ferguson struck a cautious note. The farthest data center is from commercial reality, he suggested, is where the concept becomes a draw on computing rather than its driver.
For UK investors tempted by the hype, the message is clear: this will be an IPO unlike anything seen before, but the gap between Musk’s growing ambitions and guaranteed financial performance remains wide. As with all things Musk, the potential rewards are great, but so are the risks.
