Tesla Motors Founder Taking SpaceX IPO into Orbit Soon
Could an initial public offering (IPO) be in the future for SpaceX? While prospective investors are showing increasing interest in the company, it doesn’t look as if the company is hurrying towards public ownership. But that doesn’t mean you shouldn’t keep a close eye on a future SpaceX IPO, because Elon Musk says it could be happening sooner than you might think.
SpaceX is a Trailblazer in the Aerospace Sector
Now, you might be wondering what it is that SpaceX does exactly. Started by Tesla Motors, Inc. (NASDAQ:TSLA) founder Elon Musk back in 2002, the company is in essence a smaller, private version of NASA. SpaceX is a designer and manufacturer of sophisticated rockets and space vehicles which it launches into space. While the company’s stated general mission is to expand human space exploration and eventual colonization, SpaceX has made some explicit claims about landing humans on Mars and establishing a colony by 2026. (Source: “SpaceX says it will put humans on Mars by 2026, almost 10 years ahead of NASA,” Extreme Tech, June 18, 2014.) But it doesn’t stop there, because the scope of SpaceX’s short-term goals is ambitious.
SpaceX was in fact the very first private firm to launch a reusable spacecraft into orbit and then bring it back down to Earth. It was also the first private commercial firm to visit the International Space Station (ISS), and currently has an ongoing contract with NASA to deliver supplies to the space station. (Source: “NASA Selects SpaceX’s Falcon 9 Booster and Dragon Spacecraft For Cargo Resupply,” SpaceX, December 23, 2008.) If all goes according to plan, in 2017 SpaceX is also slated to become a replacement for the Space Shuttle.
SpaceX has been valued in the range of $12.0 billion. (Source: “SpaceX’s Valuation Rockets to $12 Billion With Google Investment,” Wall Street Journal, January 21, 2015.) In terms of external investment, SpaceX has raised approximately $1.2 billion in seven rounds of equity funding since March 2006; the company is in fact a profitable one. With dozens of successful launches under its belt, SpaceX has over $5.0 billion in various contracts, and all signs point to this number increasing. (Source: “NASA set to award space station cargo contracts,” USA Today, November 4, 2015.) While this is the kind of trend investors are eager to see, the company’s continued profitability does mean that there is less incentive for an IPO in the near term.
Translation: don’t expect SpaceX to go public any time soon, but don’t be so quick to forget about it, either.
There has been no shortage of willing investors, as earlier this year SpaceX announced it had received $1.0 billion from Fidelity Investments and Alphabet Inc. (NASDAQ:GOOG). The two of them together now own approximately 10% of SpaceX. (Source: “Google and Fidelity Put $1 Billion Into SpaceX,” New York Times, January 20, 2015.)
The basic issue, however, remains because SpaceX simply has no need for public investment at the moment for the goals it has set out for itself as a company. Additionally, competition in its market is virtually nonexistent, save for a very few exceptions such as Lockheed Martin Corporation (NYSE:LMT), The Boeing Company (NYSE:BA), and Orbital Sciences Corporation (NYSE:ORB). It goes without saying that competitive moats in the space exploration sector are tremendous.
The Bottom Line on the SpaceX IPO
Considering it is the brainchild of a self-made billionaire, Elon Musk, SpaceX is undoubtedly the most ambitious aerospace endeavor ever undertaken by a private company. What the company brings to the table is revolutionary in the sense that it could disrupt the economics of space exploration. I’m talking about how SpaceX produces reusable rockets with which to launch space vehicles and satellites, a move that represents a serious shake-up in aerospace services.
When you combine SpaceX’s profitable contracts with NASA, expanding projects such as space-based global internet, and its leadership role in the tech sector, you get a pretty clear picture of a company that is well-positioned, financially sound, and in no hurry to take itself public.
However, this does not mean you shouldn’t be keeping your eyes peeled for when the SpaceX IPO does happen, because it certainly will. My money is on SpaceX going public at some point in the latter half of 2016, and savvy investors will recognize a solid stock pick when they see it.