SpaceX: buy the rocket, ignore the smoke? 

With the publication of SpaceX’s prospectus this week prior to potentially the largest IPO in history, we now know more about Elon Musk’s most valuable private company than ever before. It raises two tricky questions: should South African investors invest in the IPO? And do we actually care about the numbers, if we’re being honest?

We know Starlink is the business’s great cash engine. We know the IPO could raise between $75bn and $80bn. We know Musk will retain overwhelming control.

We also know that the company’s ambitions include rockets, satellite internet, AI, space-based data centres and, naturally, Mars. (Because why stop at broadband when you can include civilisation insurance?)

What we still do not know is the one thing investors traditionally like to have in mind before parting with money: whether any of this is even remotely sensibly priced.

SpaceX is reportedly targeting a valuation of about $1.75-trillion and a Nasdaq listing around June 12, under the ticker SPCX, with the capital raise dwarfing Saudi Aramco’s record $26bn IPO if the deal lands anywhere near the numbers being discussed.

A $28.5-trillion market

Here, two contrasting stats arise: SpaceX reported its revenue last year at $18.7bn, up 33% from the year before. However, it swung to a net loss of $4.94bn, driven by sharp increases in costs, including those for research and development. Not great.

But SpaceX also claims a total addressable market – the theoretical maximum revenue a company could generate if it captured 100% of every market it operates in – of an absolutely mind blowing $28.5-trillion, which explicitly excludes China and Russia. More than 90% of that is linked to AI spend, including a $22.7-trillion “enterprise AI” opportunity.

Digging into the numbers further, Starlink generated $11.39bn of revenue, while xAI contributed $3.2bn. Reuters, using the filing, reported that Starlink made $4.4bn in operating profit, while xAI posted a $6.4bn operating loss.

So, yes, the company is losing money hand over fist. But almost magnificently, that may not matter much.

As Steven Boykey Sidley, professor of practice at the University of Johannesburg, puts it, the valuation is based less on present earnings than on Musk’s promises: Terafab, space data centres, vertically integrated AI infrastructure, and engineering leaps that are not yet up and running.

Sidley’s caution is simple: Musk has overpromised before, plenty of times. But he has also “over-delivered” in ways people thought impossible, particularly with SpaceX itself. The result, he argues, is not a normal equity decision so much as “a willing suspension of disbelief” based on the fact that Musk is one of the few people who takes these enormous swings and occasionally hits them into orbit.

‘Vanity holding’ 

Vestact fund manager Paul Theron is similarly intrigued but wary. His likely approach for clients, he says, would be a “vanity holding”: buy a few shares to say you were there on day one, but don’t bet the farm or even the bakkie. Theron worries that much of the forecast revenue depends not just on private demand for launches and connectivity, but on Mars missions, state funding, space-based AI centres and other things that sound, even by Muskian standards, “madder than usual”.

The bullish case is not ridiculous. SpaceX has already changed the economics of space. Starlink is real, growing and strategically important. The company has made reusable rockets boring, which is one of the more extraordinary business achievements of the age. Theron notes that Musk has a habit of creating markets that did not quite exist before, after which humanity decides that, yes, actually, it would quite like the product. Tesla did it with electric vehicles; SpaceX did it with rockets; Starlink may yet do it with global connectivity.

Timeshare on Olympus Mons, anyone?

The bearish case is equally obvious. At this valuation, investors are not buying last year’s revenue. They are buying 2035, 2040 and possibly a small timeshare in Olympus Mons.

Business Insider reported that Musk’s pay package includes awards tied to SpaceX reaching multitrillion-dollar market-cap milestones, establishing a permanent human colony on Mars, and developing orbital data centres capable of vast computing output. It also reported that Musk has 85.1% voting power.

That means public investors will be invited to provide capital, applause and liquidity, but not much control. SpaceX itself warns that special voting shares will limit ordinary investors’ ability to influence corporate matters, according to AP’s account of the filing.

For South African investors, there is another practical warning: the share may list successfully and still spend years digesting its own valuation, much as Tesla has done: bursts of brilliance, terrifying volatility, and long periods in which shareholders discover that outer space is not the only vacuum.

Sidley’s summary is this: don’t bet against Elon Musk, but don’t confuse that with a reason to suspend arithmetic indefinitely.

SpaceX is arriving on public markets as something rare: a company with spectacular real achievements, spectacular real losses, spectacular real ambitions, and a valuation that requires investors to believe that all three are somehow part of the same spreadsheet.

For cautious investors, the answer is probably: buy a postcard. For Musk believers: buy a little. For the truly devout: buy the dream, buckle up, and remember that rockets do sometimes explode before they reach orbit.

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_{Top image: Chip Somodevilla/Getty Images (Elon Musk); Currency.}