SpaceX IPO Moves a Little Closer
SpaceX, the awe-inspiring space company founded by Elon Musk, is about to have a big moment; it is finally ready to re-launch a previously used rocket. If it works, Musk will have taken a giant step towards a SpaceX IPO.
The launch, scheduled for sometime in the fourth quarter of 2016, is being funded by a Luxembourg-based satellite operator named SES. It will be the first-ever commercial launch on a used rocket, meaning the stakes for SpaceX are fairly high.
“Having been the first commercial satellite operator to launch with SpaceX back in 2013, we are excited to once again be the first customer to launch on SpaceX’s first ever mission using a flight-proven rocket,” Martin Halliwell, chief technology officer at SES, said in a statement.“We believe reusable rockets will open up a new era of spaceflight, and make access to space more efficient in terms of cost and manifest management.” (Source: “Satellite operator SES will be the first to launch cargo on a used SpaceX rocket,” The Verge, August 30, 2016.)
Lowering the cost of space travel is crucial to everything Elon Musk has planned for SpaceX. Without those savings, SpaceX cannot hope to increase the number of missions to space, nor can Musk achieve his dream of colonizing Mars.
The prospect of a SpaceX IPO would turn to dust if the company can’t make reusable rockets the industry standard. By sheer logic, SpaceX flights should fall drastically in price, edging out competitors who need to build a new rocket for every flight.
Musk likens it to air travel. Imagine if we threw away a 747 for every flight from London to New York. It would be an absurdly wasteful approach to air travel, but it would also turn flight into a privilege that only a handful of people could experience.
I’ve repeated this argument to several skeptics. Sometimes they scoff and say something like, “Well, yes, that would be ridiculous, but space travel is different!” But when I ask why, they don’t seem to have an answer.
The biggest cost of space travel is the rocket, not the fuel. Each “Falcon 9” launch runs SpaceX a tab of approximately $62.0 million, of which the fuel represents a minuscule 0.3%. That’s right; SpaceX only spends $200,000 filling up the tank on a Falcon 9. (Source: “How (and Why) SpaceX Will Colonize Mars,” Wait But Why, August 16, 2015.)
Courtesy of SpaceX’s web site
What This Means for a SpaceX IPO
Elon Musk is always saying that a SpaceX IPO is directly tied to the company’s ability to reach Mars. Anyone who doesn’t follow SpaceX closely would probably think that day is years down the road. It’s not, as SpaceX is planning its first launch to Mars in 2018.
Granted, this 2018 launch would only include a probe, but it’s a start. Musk has been equally clear that SpaceX can’t afford its Mars adventure without first having a reliable cargo business here in Earth’s orbit. To put it another way, SpaceX needs the wider margins that reusable rockets will provide.
The company took its first major step towards a SpaceX IPO when it landed a reusable rocket last year. It has since repeated that feat five times, both at sea and on land. SES will be using the rocket that SpaceX landed back in April.
Let’s assume the launch is successful. SpaceX flies the Falcon 9, puts the “SES-10” satellite into high orbit, and touches down safely on the landing pad. It would serve as a proof of the concept that Musk can actually make reusable rockets into a commercial reality.
Until that point, reusable rockets would just be theory. Once they are legitimized, then SpaceX will truly be on a path to Mars, and consequently, a SpaceX IPO.
But if you aren’t willing to wait a few years to bet on Elon Musk’s space plans, I suggest taking a closer look at his other companies. Tesla Motors Inc (NASDAQ:TSLA) is also transforming how we travel, but right here on Earth. The last time investors had this kind of investment opportunity was in 1903, when Henry Ford set out to mass produce a personal car. Elon Musk is following in that Great American tradition, but you’ll have to read our Exclusive Free Report to learn more. Click here for more information.