Elon Musk has never been one for convention, and his plans for the SpaceX initial public offering are no exception.
The aerospace-to-artificial intelligence conglomerate is preparing to court retail investors on an unprecedented scale as it targets a valuation of $2tn (£1.5tn) in what would be the largest stock market flotation ever attempted.
In a move that harks back to the great British privatisations of the 1980s, SpaceX has earmarked up to 30 per cent of its shares for non-professional investors rather than reserving the bulk of the offering for the City institutions and Wall Street heavyweights that typically dominate such deals. The company is banking on Musk’s devoted following to help it raise $75bn (£56bn) when it lists later this year.
Details of a summer roadshow emerged this week after SpaceX briefed the 21 banks retained to manage the deal. Analysts from the underwriting syndicate will receive their first formal briefing on 7 June, followed four days later by an event for 1,500 retail investors at a venue yet to be disclosed. Shares will also be offered to investors in the UK, the EU, Australia, Canada, Japan and South Korea.
Bret Johnsen, SpaceX’s chief financial officer, is understood to have told the banks that retail participation would be larger than in any previous IPO, describing the company’s individual supporters as people who have been “incredibly supportive of us and of Elon for a long time”. The approach echoes the way Margaret Thatcher’s government sold British Telecom shares directly to ordinary savers in 1984, giving millions their first taste of share ownership.
Industry observers have compared the excitement surrounding the listing to the frenzy that accompanied Google’s debut in 2004. The company’s implied valuation has climbed sharply in recent months, rising from $1.25tn when SpaceX merged with Musk’s artificial intelligence venture xAI in February to $1.75tn a month ago and now $2tn according to Bloomberg.
Whether that figure can be justified remains a matter of heated debate. George Ferguson, a senior analyst at Bloomberg Intelligence, noted that the only publicly available financial data is top-line revenue, making a precise valuation difficult. He forecast revenues of $20bn for SpaceX this year but cautioned that xAI, which accounts for just $1bn of that figure, is “a laggard in the AI race right now” and represents a significant portion of the overall valuation.
SpaceX generated between $15bn and $16bn in revenue last year, with the satellite broadband service Starlink and US government defence and space contracts providing the lion’s share. A full prospectus is expected in late May, at which point investors will get their first detailed look at the company’s profitability.
Morgan Stanley, Bank of America, Citigroup, JP Morgan and Goldman Sachs are leading the fundraising, underscoring the sheer scale of the transaction.
Perhaps the most intriguing element of the investment case is Musk’s pivot from his long-held ambition of colonising Mars to a newer, arguably more commercial vision: datacentres in space. Proponents argue that orbiting facilities powered by a constant supply of solar energy could solve some of the terrestrial power constraints bedevilling the AI industry.
The concept remains untested, however, and the technological hurdles are formidable. Solar radiation, space debris and the sheer difficulty of transporting and assembling datacentre components in orbit all present challenges that would likely require advanced robotic systems not yet in existence. SpaceX’s new Starship rocket, billed as the world’s most powerful launch vehicle, is central to the plan, though a test launch scheduled for this week has been pushed back to mid-May.
Ferguson struck a cautious note. The further away space-based datacentres are from commercial reality, he suggested, the more the concept becomes a drag on valuation rather than a driver of it.
For UK investors tempted by the hype, the message is clear: this will be an IPO unlike anything seen before, but the gap between Musk’s soaring ambitions and proven financial performance remains considerable. As with all things Musk, the potential rewards are vast, but so too are the risks.
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SpaceX woos the small investor as Musk eyes the biggest flotation in stock market history