Elon Musk Should Keep SpaceX Private
Investors have been hungry for a SpaceX IPO (initial public offering) ever since the company achieved suborbital space flight in 2008. Since then, SpaceX has checked quite a few boxes off Elon Musk’s to-do list. However, I don’t think Elon Musk will give investors the chance at a SpaceX IPO any time soon.
Why, you ask? Well, because space travel is hard and investors are short-sighted.
Rockets have to break free of Earth’s gravity, shoot through the atmosphere, enter space, and then return safely to Earth. Even with the best engineers in the world, mistakes are going to be made. There’s simply no avoiding it.
Can shareholders of a public company stomach that kind of volatility? I doubt it. Stock markets aren’t exactly known for “keeping calm and carrying on.” They’re more likely to panic at the slightest deviation from quarterly guidance, as Elon Musk knows all too well.
After all, he is a major shareholder in two publicly traded companies: Tesla Motors Inc and SolarCity Corp, both of which have seen huge swings in their share prices. It doesn’t matter if Musk sets out a long-term plan for the company—one way or another, it’ll end up being ruled by the market’s short-term expectations.
Imagine if there had been a SpaceX IPO three or four years ago. The company could have premiered on the stock exchange to great excitement, but then it would have plummeted last year after a SpaceX rocket exploded mid-flight. (Source: Vance, Ashlee, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future [Harper; 2015].)
I can only imagine how the media tone would shift. There would be a bunch of fear-mongering stories about the “end of SpaceX” or why the “SpaceX IPO was a disaster.”
Obviously, this would inject a strain of tension into SpaceX stock, thus lowering the company’s share price. Eventually, the company would run out of goodwill and the market would shorten SpaceX’s leash.
Investors would lose patience with every roadblock. For instance, after the company’s repeated failures to land its booster rocket at sea, there would have been a bunch of op-eds calling for SpaceX to focus on ramping up its launch activity.
Forget the grand ambitions of reusable rockets and travelling to Mars, they would say.
But Elon Musk wouldn’t do that. He’s said time and again that Mars is his endgame and that end goal is only possible with reusable rockets. He’d keep pushing forward no matter how many times rockets blew up on landing—but retail investors wouldn’t. They’d want more launches because that’s what brings home the bacon!
The company spends roughly $800 million–$900 million every year, while only bringing in $60.0 million per launch. It would need to complete at least a dozen launches a year.
Luckily, rocket launch services are in demand. SpaceX already has $5.0 billion worth of flights booked on their manifest, much of which comes from communications providers.
If anyone still doubts that Elon Musk is against a SpaceX IPO, they should probably read Ashlee Vance’s authorized biography of Musk, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future. There are whole passages of text dedicated to a SpaceX IPO. To be clear: Musk doesn’t say SpaceX will never go public, only that it wouldn’t make sense before the company goes to Mars.
The Bottom Line on a SpaceX IPO
“Creating the technology needed to establish life on Mars is and always has been the fundamental goal of SpaceX,” Elon Musk wrote in an e-mail to SpaceX employees. “If being a public company diminishes that likelihood, then we should not do so until Mars is secure.”
Considering that the earliest manned mission to Mars is scheduled for 2024, I wouldn’t get your hopes up for a SpaceX IPO. It’s clearly not on the table—yet.