Is a SpaceX IPO Coming?
Elon Musk wants to become the king of Mars. Better yet, he might prefer the title “President of Mars,” since he would prefer adopting a democratic system for his space colony.
Does that sound farfetched? It’s not to Elon Musk, whose SpaceX Corporation is on track to bring the first visitors to Mars—human, at least—as early as 2024. To prepare for that first visit, SpaceX will be launching cargo flights to Mars by 2018.
Will regular investors get a chance to buy a piece of the SpaceX action? In other words, will there be a SpaceX IPO (initial public offering)? Despite the rumors and the hopes of many Elon Musk fans, this seems unlikely.
SpaceX IPO Makes Little Sense
Few harbor any doubts that SpaceX is a private company that, unlike few others, could revolutionize the way we think about space exploration. However, there’s little chance SpaceX will change the way investors think about space. Bluntly speaking, a SpaceX IPO fails the commonsense test.
The appeal of a SpaceX IPO to investors is not hard to understand. On July 18 alone, SpaceX has established two new and back-to-back records. The latest mission saw a SpaceX “Dragon” capsule depart for the International Space Station (ISS) as the first stage of the “Falcon 9” rocket returned to Earth, landing gently on the very Cape Canaveral launch pad from which it took off a few minutes earlier.
This mission has the scent of “the future” and it appeals to dreamers and investors alike. The latter salivate at the possible commercial opportunities of developing a new world on Mars, but a SpaceX IPO implies too many risks in a venture that is wrought with them.
Investing in SpaceX, unlike investing in some of its competitors (which also have no plans for IPOs), means potentially having to absorb the risk of disasters even bigger than the 1986 “Space Shuttle Challenger” disaster and the later 2003 “Columbia” crash on approach for landing. Those episodes caused a slowdown at NASA, but as a government agency, the repercussions were spread differently than if NASA had been a public corporation with investors. The latter would have lost most of their shares and the company would have faced myriad lawsuits, putting it out of business.
No Doubting Company’s Success, but a SpaceX IPO Is Unlikely
There’s no doubt that SpaceX has managed to successfully land the first stage of the Falcon 9 rocket on the launch pad three times.
How long did it take to achieve this, though? All it takes is one mishap for the whole mission to crash. Many attempts have failed in the past. The fact is that the main goal of these maneuvers is to demonstrate the technical feasibility and safety of the controlled return of at least part of a rocket. This, says Elon Musk, lowers the cost of space exploration.
All of this is true. But, how many investors could stand the tension of the first SpaceX manned mission? How would they justify investing in an IPO for a company whose very goal is to send people to Mars without any assurance they can get back to Earth?
As an example, Boeing Co (NYSE:BA) and Lockheed Martin Corporation (NYSE:LMT), both successful companies, are now trading at near-record highs and have formed a joint space exploration venture called United Launch Alliance (ULA). They have kept it separate from the core activities and established it as a private entity. This enables LMT and BA stock to avoid the liabilities and risk of the still nascent space exploration industry from contaminating established corporations and their investors.
The Bottom Line on a SpaceX IPO
The Space Exploration Technology Corporation, better known as SpaceX, emerged in 2002. Its purpose—or “mission”—is to build a fully reusable space launcher to cut costs for missions to the ISS. In turn, this would enable the company to build the capital it needs to launch a mission to Mars well within the lifetime of its founder, Elon Musk.
None of SpaceX’s competitors are traded on Wall Street. For instance, apart from the aforementioned ULA, Amazon.com, Inc.’s (NASDAQ:AMZN) Bezos has no plans to launch an IPO for Blue Origin. As hopeful as many investors might be, there won’t be a SpaceX IPO anytime soon.