SpaceX IPO the Final Frontier?
Is an initial public offering (IPO) the final frontier for SpaceX? Investors might be interested in gravitating toward a SpaceX IPO, but the company doesn’t seem to be in any rush to jettison private life.
SpaceX, a sort of private NASA, was founded in 2002 by Elon Musk. No one-hit wonder, Musk is also famous for starting successful firms like PayPal and Tesla Motors, Inc. (NASDAQ/TSLA). He also helped start SolarCity Corporation (NASDAQ/SCTY) with his two cousins.
What Is SpaceX?
The company designs, manufactures, and launches advanced rockets and spacecraft. While the company has long stated its desires to set up a colony on Mars (stating it will put humans on Mars by 2026, almost 10 years ahead of NASA), its short-term plans are equally as ambitious.(1)
In 2010, SpaceX became the first private company to put a reusable spacecraft in orbit, then return it to Earth.(2) In 2012, it became the first private company to dock a spacecraft with the ISS (International Space Station) using its “Dragon” capsule as part of a resupply mission.(3)
The company currently has a $1.6-billion contract with NASA to fly numerous cargo resupply missions to the ISS. It also won a $2.6-billion contract to serve as one of NASA's replacements for the Space Shuttle, transporting astronauts to and from the ISS, beginning in 2017.(4)
Google and Fidelity Pay $1.0 Billion to Climb Aboard SpaceX
According to the company’s web site, SpaceX is profitable and cash flow–positive. It also has nearly 50 launches on its manifest, representing close to $5.0 billion in contracts. That is the information investors love to hear. Unfortunately, SpaceX isn’t desperate for money just yet.
On Tuesday, January 20, SpaceX announced it raised $1.0 billion in financing from two new investors, Google Inc. (NASDAQ/GOOG) and Fidelity Investments. Collectively, the two companies own roughly 10% of SpaceX.(5)
Why Fidelity would want to get involved in SpaceX is difficult to pin down. A company spokesperson for Fidelity said the investment was done "on behalf of the mutual funds."(6)
Fidelity is also fond of Musk’s other companies. It is the second-biggest owner of Tesla, with a 6.7% stake. Fidelity also owns a 1.7% take in SolarCity—making it the 13th biggest overall owner. SpaceX might also be a great long-term play for Fidelity. Should SpaceX go public, chances are good that Fidelity would get a nice payout.
As for Google, that one makes a lot more sense. Google, the world’s most popular web site, has long said it hopes to bring high-speed, low-cost Internet to the four corners of the globe. This infusion of cash could help Google achieve this goal. And it could also help stave off advances from Facebook, Inc. (NASDAQ/FB), the second-most popular site in the world, to do the same. In March 2014, Facebook announced that it purchased Ascenta, a U.K. maker of high-altitude, solar-powered drones, for $20.0 million.(7)
Other Options for Investors
Right now, SpaceX doesn’t need investors to help it accomplish its short-term goals. Until it does, investors will have to sit tight—or get involved in companies operating in a similar space.
A few companies with operations in outer space include Orbital Sciences Corporation (NYSE/ORB), Alliant Techsystems Inc. (NYSE/ATK), Lockheed Martin Corporation (NYSE/LMT), The Boeing Company (NYSE/BA), and AeroVironment, Inc. (NASDAQ/AVAV).
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