Will NASA Competition Accelerate a SpaceX IPO?
U.S. President Barack Obama has formally announced that the National Air and Space Administration (NASA) will be launching a manned mission to Mars by 2039. Does this mean the time is approaching for a SpaceX initial public offering (IPO)?
After all, SpaceX (or Space Exploration Technologies Corporation) founder and CEO Elon Musk said his company wants to get to Mars by 2024. SpaceX even test-started a prototype rocket engine for that mission just a few weeks ago.
NASA has dominated the space race by being the first to achieve a manned mission to the moon. But, after decades of government-run, taxpayer-funded missions, NASA wants to rely more on the private sector. This also suggests that the timing is ideal for a SpaceX IPO.
But as viable satellite-launch and supply-delivery short missions to the International Space Station (ISS) have proven, a SpaceX IPO is still premature. Indeed, the private space travel and cargo company has moved beyond trend to necessary fact. Designed to date with modules manufactured by major government space agencies around the world, the International Space Station will rely ever more on modules designed by corporations.
SpaceX Has Earned NASA’s Trust. Can It Earn Investors’ As Well?
This is certainly NASA’s plan, and SpaceX has a proven record with the agency. The problem, and it’s a biggie, is that SpaceX’s Mars-conquering ambitions are too risky for any investor. Reaching Mars will be hard enough; returning from Mars will be even harder. But colonizing it sounds like something that is positively more apt for famed science fiction writer Ray Bradbury to ponder than for investors on Wall Street.
Consider NASA’s own reservations about a Mars mission. It’s not just the safety risks; NASA is worried about costs. The agency suggests that to accomplish as ambitious a journey as one to Mars, it has to reassess its priorities in the coming years. Its budget is not infinite. NASA will likely have to stop participating in space programs in which the agency has already committed itself, or at the very least, delay and reduce them in order to free up resources to carry out the Martian adventure that Barack Obama wants. Imagine now how eventual SpaceX shareholders might feel?
Investors would shelve the Mars plans to focus on missions that generate revenue and earnings. Indeed, a SpaceX IPO would make sense after a government agency like NASA successfully runs and completes a Mars mission, absorbing the majority of the risk. After the technologies and the mission parameters are proven, corporations can compete, working around a “known unknown” rather than “an unknown unknown,” as former Defense Secretary Donald Rumsfeld put it.
After all, even NASA did not start out its space adventure all by itself. The agency exploited proven-and-tested World War II German military rocket technology, reshaping and advancing it to achieve the “Saturn V” and “Apollo” missions. If SpaceX and Elon Musk were to go public, they would better serve investors by letting go of the mission to Mars and focusing on service to the ISS.
The Wall Street Case for SpaceX Is the ISS, Not Mars
Indeed, if NASA is serious about retooling for “Mars 2039 – here we come,” then it would likely have to give up the ISS. NASA believes it is time to transfer that activity—low Earth orbit about 250-1300 miles from the atmosphere, where the ISS is located—to private enterprise. At that point, SpaceX would have a real business to speak of, benefiting from NASA engineers and experience, and competing against other governments’ agencies.
This would be a viable business proposition. NASA has already signed a contract with SpaceX and Boeing Co (NYSE:BA) for cargo missions to the ISS. SpaceX is already able to handle this task. Moreover, SpaceX will also have to prove itself capable of delivering human crews to the ISS in 2017 and 2018. That is crucial in order to end reliance on the Russians.
As for Mars ambitions, companies come and go all the time. Governments need national space capabilities upon which they can always rely. There may even be an insufficient market to sustain SpaceX’s less ambitious plans, let alone a mission to Mars. Therefore, a SpaceX IPO remains less likely than SpaceX actually fulfilling the Mars mission by 2024—for now.