HOUSTON: SpaceX and investment bankers will host meetings to pressure-test the Elon Musk-led company’s targeted US$2 trillion valuation, a crucial step as it drives towards the largest-ever initial public offering (IPO), sources say.
Two months after a merger with xAI, senior bankers are poised to begin talks around the rocket, satellite and artificial intelligence (AI) company’s initial public offering, to determine if its vaunted valuation will still lure in investors.
Its market value is now expected to top US$2 trillion, up from expectations of US$1.75 trillion less than two weeks ago, sources said.
“What you’ve got to be convinced of, and this is what they’ll be working on until this is filed publicly, is continuing to sell the dream and basically there’s nobody that’s been better at selling the dream than Elon Musk,” said David Erickson, an adjunct associate professor at Columbia Business School and a former co-head of global equity capital markets at Barclays Plc.
Representatives for SpaceX didn’t immediately respond to requests for comment. Musk appeared to push back on the valuation target of US$2 trillion in an April 3 X post, saying “don’t believe everything you read”. At more than US$2 trillion, SpaceX would be bigger than all but five of the companies in the S&P 500 Index: Nvidia Corp, Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc.
Despite generating a fraction of the revenue, its market value would dwarf Meta Platforms Inc and Musk’s own Tesla Inc, the two other members of the so-called Magnificent 7 stocks.
Such a valuation implies a price-to-sales ratio of more than 100-times on a trailing basis, according to analyst estimates, easily topping that of retail-favourite Palantir Technologies Inc’s lofty ratio of roughly 79 times, by far the highest in the S&P 500 Index.
Bloomberg Intelligence estimated SpaceX’s rocket launch programme and Starlink satellites will generate the majority of its revenue, approaching US$20bil in 2026, with xAI likely to generate less than US$1bil.
“The reality is it’s not about the fundamentals, nobody is going to get there on the fundamentals from a math standpoint because the math doesn’t work,” said Erickson.
A pair of rocket test launches are expected ahead of a potential June trading debut, which the company has been targeting, people have told Bloomberg.
Those will be “crucial for what happens to the IPO,” according to Franco Granda, a senior analyst at PitchBook.
“If any of those two fail there’s a chance the IPO might not even happen,” he said in an interview.
“This will dictate everyone’s direction towards the IPO.”
The first flight of SpaceX’s latest iteration of its reusable, super heavy-lift launch vehicle is four to six weeks away, Musk said in a post on X last Friday.
A listing for SpaceX could raise as much as US$75bil, Bloomberg News has reported.
At that size, it would dwarf the biggest ever IPO, Saudi Aramco’s US$29bil debut in 2019.
The company would use the money raised in an IPO to fund Musk’s vision of AI data centres in space and a factory on the moon.
The billionaire’s grand plans will require unprecedented amounts of capital, and resources that span several of the companies he controls.
Musk said in March that his Terafab project, which would eventually manufacture his own chips for robotics, AI and space data centers, will be jointly run by Tesla and SpaceX.
PitchBook’s Granda, who called its targeted valuation “justifiable” a month ago, cautioned that Musk’s ever-expanding vision could present upside but also add to mounting risks. — Bloomberg
