Elon Musk Won’t Let SpaceX IPO Fail
When can we expect an initial public offering (IPO) from SpaceX? That’s the question on everyone’s mind, or at least everyone who is bullish on the aerospace industry. A SpaceX IPO would fundamentally alter the dynamics of space exploration, making it an investable industry that is forced to innovate.
In many ways, the debate around a SpaceX IPO is reflective of the oldest debate in finance. Should a company stay private or go public? Traditionally, going public meant the company in question had accomplished its mission, had made the leap from pond to ocean and was now insulated from the woes of private life.
In those days, a SpaceX IPO was a no-brainer. Issuing public SpaceX stock would absolutely help the company; any other conclusion was laughable. But those times have long since past. Many fear the shortsighted rule of quarterly capitalism and its potentially destructive impact on visionary companies like SpaceX.
In fact, many analysts would argue that a SpaceX IPO is the worst decision Elon Musk could make. I haven’t yet decided where I stand on this issue, so let’s talk it through.
SpaceX IPO Could Raise a Fortune
The upside benefits of a SpaceX IPO are fairly obvious. Rather than rely on its own revenue cycle and private sources of capital, SpaceX (formally called Space Exploration Technologies Corporation) could get huge sums of money from all types of investors. By the end of it, a SpaceX IPO could draw in enough cash to help SpaceX reach Mars or extract minerals from asteroids. That’s the benefit of a public stock exchange.
As an ordinary investor, I may want to own SpaceX stock, but there’s no way for me to buy it. The, let’s say, $1,000 I would use in the event of a SpaceX IPO is unable to reach the company. Only institutional investors have access to SpaceX stock right now.
Now imagine there are thousands of people like me across the country. Doesn’t it stand to reason that a SpaceX IPO could raise a lot of money for a business that is capital-intensive? Space exploration is an expensive business that has only been attempted by governments until very recently.
But governments can get lazy. Once the space race between the U.S. and Russia died down, innovation faded from the once-great space agencies. NASA continued to wear out its space shuttles until they eventually had to be retired. Elon Musk saw that as a wasted opportunity and mobilized a private enterprise into existence. It was a bold line of thinking, but in order to compete with governments, he will need the help of public markets.
Issuing SpaceX stock has its pitfalls, mind you. After a SpaceX IPO, investor sentiment will matter more than Elon Musk may be comfortable with, but he may not have a choice if he hopes to move the company forward.
SpaceX IPO Has Its Pitfalls
Issuing SpaceX stock may become necessary, despite being less than ideal. Running a space exploration endeavor requires a lengthy timeline that is a far cry from the kind of short-term thinking for which capital markets are famous.
But there is no such thins as a perfect trade-off. At some point, a public SpaceX stock may be the only way to push the company forward. For instance, SpaceX just bid for a license that would let the company set up a network of satellites to cast Internet access across the world. (Source: “SpaceX founder files with government to provide Internet service from space,” The Washington Post, June 9, 2015.)
At the same time, Elon Musk wants to extend the reach of SpaceX all the way to Mars. These are bold ambitions and it’s possible that the might of the stock market will be needed to make them reality.