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Chapter 1: What is the significance of SpaceX's upcoming IPO?
Elon Musk's company SpaceX is going public, meaning at some point on Friday, SpaceX will begin selling shares on the stock market. And it's aiming to raise a lot of money.
SpaceX is by far the largest IPO ever. So I don't even have to say the largest that I've covered. It's the largest ever.
Our colleague Cori Dreebush is an expert in Initial Public Offerings, or IPOs. And she says that the amount of money that SpaceX is aiming to raise, a whopping $75 billion, is more than the amount typically raised in an entire year by all other IPOs combined.
So think about the total dollars that are raised in a year by IPOs in the U.S.
So all of the companies that are listing, all the money that they're raising from all these investors.
Yeah, all the companies listing in the U.S. to raise money each year. If you look back the last 10 years, that total has only exceeded the $75 billion SpaceX is going for twice.
That is, forgive the pun, astronomical.
It's pretty crazy.
So what does that tell you?
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Chapter 2: How does SpaceX's IPO compare to previous IPOs?
It speaks a lot to the craziness of what SpaceX hopes and dreams to do. They kind of believe in almost the quote-unquote impossible.
The price SpaceX is selling shares for values the company at $1.77 trillion. That puts it among the top 10 most valuable companies in the world. On paper, does it look like SpaceX is a company that should be worth $1.7 trillion?
SpaceX is selling itself based on its potential, not its current ability to turn profits. SpaceX, in its current iteration, is unprofitable. You're buying in to what it could be, not what it is right now.
Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Thursday, June 11th. Coming up on the show, is SpaceX really worth $1.7 trillion? When Elon Musk founded SpaceX in the early 2000s, he had big dreams for what the company could accomplish.
The long-term goal of SpaceX is perhaps not a very commercial-sounding goal at all, which is to really build the technologies necessary to make life multi-planetary.
Human life on other planets? His vision wasn't always taken that seriously. For one, Musk didn't have a background in aerospace. And for the most part, launching rockets into space had been NASA's domain, not a private company's. It didn't help that getting rockets into orbit is no easy task. It's literally rocket science. Plus, it's super expensive and dangerous.
The first three rockets SpaceX launched. And here we go in 10, nine, eight, seven. They never made it into orbit. Five, four. The Falcon 1 rockets, which cost millions of dollars to make, were either destroyed or lost mid-flight. But in 2008, SpaceX finally started to take off when Falcon 1 Flight 4 successfully reached orbit.
Which means Falcon 1 has made history as the first privately developed launch vehicle to reach Earth orbit from the ground.
SpaceX later expanded beyond the rocket business. It went on to launch a satellite internet arm called Starlink, and it eventually merged with XAI, Musk's artificial intelligence startup, which also owns the social media platform X, by the way. So SpaceX is now a rockets, internet, AI, and social media company. How all that works out financially was mostly a mystery.
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Chapter 3: What is SpaceX's valuation and how is it determined?
So yes, SpaceX has its famous space business, which includes rockets. Then it also has Starlink. And then the final real segment of the business is earlier this year, it acquired another Musk company, XAI, the maker of Grok. So it now has this artificial intelligence segment, which is unprofitable.
The XAI division only brought in around $3 billion in revenue, but it's spending money like crazy, trying to build data centers and improve its technology in an arms race with rivals like OpenAI and Google. When you add it all up, the Starlink, the rockets, the AI, SpaceX is not a profitable company. It generated roughly $19 billion in revenue, but still lost nearly $5 billion overall last year.
This is why some analysts are raising eyebrows over this $1.77 trillion valuation. Not to get too technical, but that means that SpaceX is listing at 94 times sales. By comparison, Apple's price-to-sales ratio is around 10, even though it has more than 20 times the revenue that SpaceX does. Does anybody look at this valuation, this potential valuation, and say, I don't think so?
I mean, any analysts out there that are skeptical?
I mean, Morningstar came out and put out a valuation that was significantly low. I think it was below $800 billion, they said, was the more reasonable valuation.
Still pretty big, but yeah, that's like less than half of what people are anticipating. Exactly. Yeah. Just to say, it isn't uncommon for companies to go public while operating at a financial loss, especially in the tech world. And a lot of what drives companies to go public is actually the need for an influx of cash so it can be reinvested into the company to grow for the future.
And the future is really what makes people excited about SpaceX. Some of the banks SpaceX is working with on this IPO think SpaceX's future could be really lucrative.
So the future of SpaceX, if you believe these analysts, is the AI segment, this really unprofitable, very new segment to the company. And by 2027, research analysts at the two banks that are leading the IPO, Goldman Sachs and Morgan Stanley, they both project the company's revenues from AI to eclipse the revenues from SpaceX. and satellite segments.
And by 2035, Morgan Stanley Research Analysts projected AI to bring in around $1.1 trillion in revenues. So again, you can believe it or not, but that all goes into this $1.77 trillion valuation.
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Chapter 4: What are the main business segments of SpaceX?
We don't.
We haven't heard from them directly.
SpaceX sees this as, okay, SpaceX has this... very dominant position where they're able to launch things into space fairly easily when you think about it. They have gotten this down pat. So they are able to do this and they figured, you know what, we can be the ones to operate orbital data centers and we can do that for both for XAI and for other AI companies that might need that.
Right, because other AI companies don't own rockets in the same way that SpaceX does.
Not even rockets. They don't know how to launch the rockets.
And so in some ways, the idea is that the market that SpaceX is going to have, so to speak, or that it could unlock, is space. It's like all of space and everything that could potentially come with it.
Yes. What they call a total addressable market of $20 trillion of potential sales are out there.
$28 trillion. That's how big SpaceX thinks the space market could be. To put that in perspective, that's about as much as the annual GDP of the entire U.S. economy. In its IPO filing, SpaceX said those revenue opportunities were the largest in, quote, human history, with the majority of that revenue coming from future AI-related business.
what SpaceX needs to do to hit these projections that analysts are seeing in the future, trillions of dollars of revenue. It's all about AI, and to make that work, you need to make orbital data centers work. So you have to have real confidence that that's gonna happen, because if that doesn't happen, where are these profits coming from?
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Chapter 5: Why is Starlink crucial for SpaceX's revenue?
What kinds of things have you been hearing from retail investors in terms of how they're feeling about this coming IPO?
There are a lot of believers. And I would say that's what we are hearing. There is extreme interest in the IPO. There's such a group of Musk fans who, in Musk I trust, they believe in Musk. They believe in this dream. They're just happy to be a part of it.
Corey and a colleague spoke to some everyday investors earlier this week, like Tamar June, a tech executive in her 60s who uses Starlink at home. She says she wants to be in on SpaceX in part because she believes in Musk. The man can execute. He can execute on his vision. Dean Norrie is another investor who wants in.
He doesn't consider himself a Musk fanboy, but he's been listening to Musk's videos and podcast interviews and learning about SpaceX for years.
They're the only organization that I believe is teed up and ready for the total market that's going to become available in space.
And Josh Hill, a sales manager at a manufacturing company, says that while he's skeptical of the Musk hype, he does plan to buy in eventually.
He's done a really good job of doing what he does best, and that's hyping things up and moving pieces around to make it look attractive at $2 trillion.
It's shocking to me how much interest I hear.
Why is it shocking to you?
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Chapter 6: What challenges does SpaceX face with its AI division?
So there's all this excitement now, but does that tell you anything about whether SpaceX will actually live up to all this hype? I mean, that is the... $1.7 trillion question.
Yeah, it's a trillion dollar question. And it's going to be fascinating and exciting to watch on Friday.
That's all for today, Thursday, June 11th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Hannah Aaron Lang, Ben Cohen, Betsy Peterson, Micah Maidenberg, and Tim Higgins. Thanks for listening. See you tomorrow.