SpaceX, sudden wealth and the miracle of the market

SpaceX made history last week, raising $75bn in the largest IPO on record – valuing Elon Musk’s rocket company at $1.77-trillion. Since then, the stock has gained nearly 50%.

In rand terms, at an exchange rate of roughly R16.27/$ on the day of the listing, the company was worth R28.8-trillion.

SpaceX is now one of the world’s most valuable companies. And, in theory at least, this makes Elon Musk the world’s first trillionaire.

But perhaps the more interesting story is what happened to the SpaceX employees.

The Wall Street Journal recently reported that SpaceX employees are receiving a crash course in how wealthy people manage money. Thousands of current and former employees own shares or options in the company. For many of them, the listing could turn paper wealth into real, accessible wealth.

One former employee mentioned in the article had SpaceX shares worth $21.4m at the time of the IPO, or about R348m.

Imagine that.

You go to work every day. You help build rockets, satellites and internet infrastructure. You accept part of your compensation in the form of shares or options. Years later, the company lists, and suddenly your net worth is measured not in thousands or even millions of rand but in hundreds of millions.

That is both wonderful and terrifying.

The free market at work

The article makes the point that sudden wealth brings its own problems. Employees have to decide whether to sell shares, how much to sell, how to diversify, how to handle tax, and how not to let emotion take over. If 90% of your net worth is in one company, even a brilliant company, you are exposed to concentration risk.

But that’s not what I want to focus on. There is something larger here. This is the free market at work. This is wealth creation.

Free markets are not a zero-sum game in which one person can become rich only because someone else has become poorer. In cases like this, a business is built, value is created, investors voluntarily assign a price to that value, and the people who helped build the business share in the outcome.

No-one had to become poorer for those SpaceX employees to become wealthier.

That is the part many critics of capitalism miss. They see wealth only as something to be redistributed, not something that can be created. But the real challenge for any society is not only how wealth is divided. It is how wealth is produced in the first place.

The real question to ask is: what actually produced this wealth?

A person had an idea. He persuaded investors to back it. He persuaded engineers and employees to work on it. They built something. They failed, tried again, improved, launched rockets, landed boosters, built satellites, and created a business that the market now values at about $2.65-trillion.

And now wealth – real, life-changing wealth – flows outward to the founders, investors, engineers, employees and early believers.

This is the free market at work.

A bad rap

Capitalism gets a bad reputation. It is associated with greed, inequality and exploitation. Some of that criticism is fair. Bad actors exist in every system, and everything human beings touch can eventually become corrupted.

But the criticism often misses what capitalism actually is at its core.

Adam Smith described it in 1776 in The Wealth of Nations. His insight was not merely a political manifesto. It was closer to a discovery. He observed that when people are free to pursue their own interests through voluntary exchange, property rights, savings, investment and competition, something remarkable can happen.

Wealth gets created. Specialisation deepens. Living standards rise. Capital flows to ideas. Risk is rewarded when it works and punished when it does not.

Not because anyone planned it perfectly from the centre, but because the system channels individual effort into wider economic outcomes.

It is less an ideology and more like a natural law.

You can disagree with gravity. You can resent it, critique it, write essays about its unfairness. Gravity does not care. It just operates.

Building the dream

The free market is similar. You can dislike parts of it. You can argue that it is unfair. You can point to its excesses and failures. And often you will have a point.

But now that SpaceX has created millionaires among its thousands of engineers and employees, the rest of us can own a small piece of a company that launches satellites, builds rockets, and wants to put humans on Mars.

That, to me, is almost miraculous.

The lesson is not to chase the next SpaceX. It is simpler than that.

Observe the system. Understand how it works. Own productive assets. Diversify. Be patient. Build where you can. Invest consistently where you cannot. Let human ingenuity and the market mechanism work for you over time.

You do not need to build the rocket. But you can own part of the market that makes rockets possible.

Matthew Matthee runs a wealth management practice in Knysna, specialising in retirement planning and investments.

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_{Top image collage: Rawpixel; Currency.}