# The Most Unprofitable IPO in Wall Street History

An episode of [Patrick Boyle On Finance](https://invisiblenetwork.ai/podcast/1547740313), 23 May 2026, 30 min.

Audio: https://traffic.megaphone.fm/APO1942399886.mp3

This week, SpaceX filed the prospectus for what is expected to be the largest IPO in history. The document is extraordinary — part financial disclosure, part science fiction, and part governance structure that a corporate law professor has described as offering shareholders "no votes, no sales, and no suits." We look at the numbers, the products that don't yet exist, the AI business that SpaceX's own engineers won't use, the related-party transactions, the compensation package tied to a Mars colony the company admits is "improbable," and the one rocket that everything depends on. Everything I am about to tell you comes directly from the filing. Patrick's Books: Statistics For The Trading Floor: https://amzn.to/3eerLA0 Derivatives For The Trading Floor: https://amzn.to/3cjsyPF Corporate Finance: https://amzn.to/3fn3rvC Ways To Support The Channel: Patreon: https://www.patreon.com/PatrickBoyleOnFinance Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle

## Transcript

[0:00] When a company decides to go public, they're required by the
[0:03] Securities and Exchange Commission to file an S1
[0:06] prospectus. Historically, these are some of
[0:09] the driest documents ever committed to paper.
[0:12] They're written by corporate lawyers for other corporate
[0:15] lawyers to ensure that no one, anywhere is ever accidentally
[0:20] entertained. But two days ago, SpaceX filed
[0:24] its paperwork to go public, and reading through it, it became
[0:28] immediately clear that this was not going to be your typical
[0:31] legal disclosure. First start.
[0:34] It opened with 14 pages of photographs of rockets and
[0:38] satellites, which reminded me of Adam Newman's I'll fated Wework
[0:42] prospectus, which famously opened with the line.
[0:46] We dedicate this to the energy of we greater than any one of
[0:51] us, but inside each of us. That document was later
[0:55] described as one of the worst IPO filings in Wall Street
[0:59] history. The SpaceX prospectus is
[1:02] similarly unconventional, though I will say the Rockets are more
[1:07] photogenic than the Wework community photographs were.
[1:11] The document is also filled with phrases that I'm fairly
[1:14] confident have never appeared in an SEC filing before.
[1:19] Under the Business Strategy section, right alongside
[1:22] standard disclosures about lease agreements and accounting
[1:25] standards. Management explains that their
[1:28] primary objective is to extend the light of consciousness to
[1:32] the stars, a phrase that appears 10 separate times in the filing,
[1:37] which suggests that it wasn't a typo.
[1:40] Investors are also warned that we do not want humans to have
[1:44] the same fade as dinosaurs, which is a fairpoint.
[1:48] I suppose. It's the kind of sentence that
[1:50] gets you excited about what the risk disclosure section will
[1:53] look like. The document then goes on to
[1:56] outline a string of future business lines that read like
[2:00] science fiction. They include long haul, point to
[2:04] point terrestrial travel, which I think means travelling around
[2:08] the Earth in rockets rather than in airplanes.
[2:11] In orbit manufacturing? Yes.
[2:13] In orbit passenger and cargo transportation to the Moon and
[2:17] Mars, manufacturing and energy production on the Moon and Mars,
[2:22] and asteroid mining. Because why mine for resources
[2:27] on Earth when you can chase down an asteroid in the hope that
[2:31] you'll find useful minerals on it?
[2:33] The acronym AI appears over 200 times in the document.
[2:39] The word consciousness appears 10 times.
[2:42] The word profit appears somewhat less frequently than either of
[2:46] those. What we're looking at is quite
[2:48] possibly the most extraordinary document in the history of
[2:52] American securities regulation. And today we're going to go
[2:56] through it. Because every single thing I'm
[2:58] about to tell you, no matter how absurd it sounds, comes directly
[3:02] from the filing. If you've been following SpaceX
[3:06] for the last two decades, you probably think of it as a rocket
[3:10] company. In recent years, with the rapid
[3:12] expansion of Starlink, you might have updated that to a satellite
[3:16] Internet company. But if you read the IPO
[3:20] prospectus, you're in for a surprise.
[3:23] SpaceX is now apparently an AI company.
[3:26] According to the document, 93% of the company's total
[3:30] addressable market is attributed to AI, and based on the capital
[3:35] expenditure breakdown, roughly 60% of all spending is now going
[3:40] into artificial intelligence infrastructure.
[3:44] The prospectus breaks down the business into 3 segments, Space,
[3:49] connectivity, and AI. In the first quarter of 2026,
[3:54] the space division, the part that actually builds and
[3:57] launches rockets, lost $662,000,000.
[4:01] The connectivity division, which is Starlink, turned a $1.1
[4:06] billion profit. The AI division lost 2 1/2
[4:10] billion dollars in just the last three months.
[4:14] The only division that makes money is the satellite Internet
[4:18] business. Everything else loses money.
[4:21] When Musk says that this is an AI company, what he means is
[4:25] that the one business that actually works is subsidizing a
[4:29] money losing AI venture while he tries to convince public market
[4:34] investors that the money losing AI venture is the entire reason
[4:39] the company's worth $1.75 trillion.
[4:42] If we look past the talk of extending consciousness to the
[4:46] stars and focus purely on the income statement, the financial
[4:50] reality of SpaceX is bracing. In 2025, the company generated
[4:57] $18.7 billion in revenue. Now $18.7 billion is a lot of
[5:03] money, but at a proposed valuation of $1.75 trillion,
[5:08] SpaceX is asking investors to value it at almost 100 times
[5:12] it's revenue. If SpaceX were dropped into the
[5:15] S&P 500 today, it would be the 7th largest company in the index
[5:20] by market cap. But if you ranked it by actual
[5:24] revenue, it wouldn't even meet 200.
[5:27] It would be down near Kellogg's, the maker of fruit Luke's
[5:30] breakfast cereal. You get the point.
[5:33] Unlike Kellogg's, SpaceX is not profitable.
[5:37] Space exploration is just a tougher business than breakfast.
[5:42] Last year, SpaceX posted a net loss of $4.94 billion.
[5:47] What makes this number remarkable is that Starlink
[5:50] actually generated $4.4 billion in operating profit.
[5:55] That means the rest of the business ate up more than $9
[5:59] billion in a single year. Since its founding, SpaceX has
[6:05] accumulated over $37 billion in losses, more than any other
[6:10] company that has ever gone public in history.
[6:13] And there are no signs of the cash burn slowing down.
[6:17] Capital expenditure reached $20.7 billion last year,
[6:21] quintupling from 2023, driven by Starlink expansion, Starship
[6:27] development, and AI infrastructure spending.
[6:31] To fund all of this, the company is carrying $29 billion in debt,
[6:36] including a $20 billion bridge loan taken out in March 20268
[6:42] weeks ago. So when investors hand over $75
[6:46] billion in this IPOA, meaningful portion of it may not be going
[6:51] to orbital data centers or a Mars colony.
[6:54] It goes straight back to the banks who lent SpaceX money 8
[6:58] weeks ago. Now, to be fair, the company is
[7:01] growing. Revenue is up somewhere between
[7:04] 33 and 43% annually, which is genuinely impressive.
[7:09] But that growth is coming entirely from Starling, not the
[7:13] AI business. And even that growth comes with
[7:16] a caveat. Starling's average revenue per
[7:19] user has fallen by around 18% since 2023, three as the
[7:24] company's discounting aggressively to juice it's
[7:28] subscriber numbers before the IPO.
[7:31] Back in April 2018, Gwynne Shockwell, the president of
[7:35] SpaceX, stood on a Ted stage and made the promise.
[7:39] Within a decade, she told the audience, people would be taking
[7:43] 30 minute rocket trips from New York to Shanghai.
[7:46] These rockets would compete with long haul airlines making up to
[7:51] 10 flights per day. That decade expires in under 2
[7:56] years now, which is not much time to figure out how to safely
[8:00] replace the jumbo jet with a reusable ballistic missile that
[8:04] requires passengers to withstand 3GS at takeoff.
[8:08] Now if you were paying attention earlier, you may remember the
[8:12] phrase long haul point to point terrestrial travel.
[8:15] From the prospectus that is this product.
[8:18] It is still being pitched to investors as a future revenue
[8:22] stream. There's no sign of a commercial
[8:24] commuter rocket and there are under 2 years left on the clock.
[8:28] In the list of yet to be realized business lines, there's
[8:32] a section on payment processing. Twitter, Elon Musk's Everything
[8:37] app, has been talking about becoming a financial services
[8:40] platform for several years now. They've secured money
[8:44] transmitter licenses in a handful of U.S. states, but they
[8:48] don't have a functioning payments product yet.
[8:51] So SpaceX is now partially in the business of filing paperwork
[8:55] with the Nevada Department of Business and Industry in pursuit
[8:59] of the dream of processing an $8 peer-to-peer payment on a rocket
[9:04] company social media platform. SpaceX claims its total
[9:09] addressable market is $28.5 trillion.
[9:14] This is larger than the entire GDP of the United States and
[9:18] almost entirely built on businesses that do not yet
[9:22] exist. As the Financial Times Lex
[9:25] column noted, the market has never before had to price a
[9:28] stock this speculative at this size, which is probably worth
[9:33] keeping in mind. According to the prospectus,
[9:36] enterprise applications of AI make up to 80% of Spacex's total
[9:42] addressable market. This means they expect large
[9:45] businesses to pay for masks, AI tools to improve productivity.
[9:50] If you add in consumer AI, the total AI share of the claimed
[9:55] addressable market rises to 93%. So 93% of the company's value is
[10:02] grog. Now I want to be careful here
[10:06] because 80% of a $28.5 trillion market is an enormous number.
[10:12] So it's worth asking which enterprises are currently using
[10:15] Grok. And from what I can tell, the
[10:18] primary documented use cases for Grok are fact checking tweets
[10:23] and generating non consensual nude images that have resulted
[10:27] in regulatory investigations in Spain, France and the UK and at
[10:32] least one ongoing lawsuit, which is not exactly the enterprise
[10:36] productivity pitch that I was expecting.
[10:39] The filing effectively concedes that the enterprise AI market is
[10:44] dominated by Open AI, Anthropic and Google.
[10:48] Spacex's own AI product, Grok, holds a market share of roughly
[10:52] 3.4%, according to Bloomberg. Spacex's own engineers have been
[10:58] slow to adopt Grok for technical work because it underperforms
[11:03] rival tools. Last month, Musk himself said
[11:07] that the AI code would need to be rebuilt from scratch.
[11:11] Shortly after, he sold XAI to SpaceX for $250 billion.
[11:16] His solution to Grok's weakness in coding was to attempt to
[11:20] acquire CURSOR, the tool his own engineers were actually using,
[11:25] for $60 billion with a $10 billion break fee.
[11:29] If the deal falls through, the company whose AI product
[11:34] represents 93% of it's claimed addressable market, has a
[11:38] flagship product it's own engineers won't use, and is
[11:42] spending $60 billion trying to buy a competitor so that they
[11:46] can get it to work. Spacex's near term AI revenue
[11:51] story rests substantially on a $15 billion a year deal to rent
[11:56] compute capacity to Anthropic, one of the very competitors
[12:01] whose existence proves the Grok is losing the AI race.
[12:05] So SpaceX is basically Space Core Weave.
[12:09] If SpaceX were genuinely going to be a dominant AI company, it
[12:14] would need that computing power that it owns for its own models.
[12:18] If Volkswagen were renting out all of its car factories, would
[12:22] anyone describe Volkswagen as still being in the car business?
[12:26] The more pressing problem is that this $15 billion a year
[12:30] contract, roughly 40% of projected near term revenues,
[12:35] can be cancelled by Entropic with 90 days notice.
[12:39] Spacex's entire AI business model at the moment is renting
[12:43] GP us to a competitor on terms that can vanish in a fiscal
[12:47] quarter. If Spacex's total addressable
[12:51] market is 28 1/2 trillion dollars and 93% of it is AI I,
[12:57] then by Spacex's own logic, the leading AI companies must be
[13:01] worth vastly more than SpaceX and Tropics quarterly revenue is
[13:06] already roughly double Spacex's entire AI segment revenue.
[13:11] Both on Tropic and Open AI are reportedly filing for IPOs at
[13:16] approximately $1 trillion valuations, and yet SpaceX wants
[13:21] $1.75 trillion on the basis of a market it's direct competitors
[13:27] are winning. Now, if you've been wondering
[13:29] exactly who is buying the Tesla Cybertruck, the SpaceX
[13:33] prospectus finally provides an answer.
[13:36] It turns out it was SpaceX. According to the filings, SpaceX
[13:41] purchased $650 million in goods from Tesla last year.
[13:46] This included 131 million spent on Cybertrucks, all at full
[13:51] retail price. No volume discount, which is
[13:54] notable given how hard Tesla has found them to sell.
[13:58] That works out at roughly 1500 vehicles at one point in the
[14:03] fourth quarter of 2025. SpaceX single handedly accounted
[14:08] for 18% of all Cybertruck registrations in the United
[14:12] States. Using shareholder money from one
[14:16] company that you control to support the sales figures of
[14:19] another company you control, right before both companies face
[14:23] major financial events is generally considered not ideal
[14:28] corporate governance. There is also a small accounting
[14:32] discrepancy worth mentioning. SpaceX reports buying roughly
[14:36] $650 million of goods from Tesla last year, and Tesla's own
[14:41] filings report selling $573 million of goods to SpaceX.
[14:47] So somewhere between Austin and Boca Chica, $77 million seems to
[14:52] have fallen off the back of a truck, presumably a cyber truck.
[14:57] But a few thousand overpriced pickup trucks are the least of
[15:01] the related party concerns in this document.
[15:04] Antonio Gracias is a long term Musk ally and sitting member of
[15:09] the SpaceX board of directors. He also runs a private
[15:13] investment firm called Valor Equity Partners.
[15:17] According to the IPO prospectus, SpaceX and XAI are carrying more
[15:22] than $20 billion in AI infrastructure lease obligations
[15:27] tied to agreements with entities connected to valor.
[15:31] Some of these deals are structured as what accountants
[15:34] call failed sale leasebacks. Normally, in a sale leaseback, a
[15:39] company sells an asset to an investor, gets cash upfront, and
[15:43] leases the asset backed, removing it from the balance
[15:47] sheet. When the transaction fails to
[15:49] qualify as a genuine sale under accounting rules, the asset
[15:53] stays on the books and the associated payment obligations
[15:57] get recorded as dead. Instead.
[15:59] The practical effect is that SpaceX is carrying billions in
[16:04] obligations to a firm run by one of its own board members on its
[16:08] balance sheet as dead. It's once again considered good
[16:13] practice to board members who don't have $20 billion worth of
[16:17] high interest financial loans with the company they're
[16:20] supposed to be overseeing. But anyhow, back in 2016, Elon
[16:26] Musk used Tesla shareholder money to acquire Solar City, a
[16:31] struggling solar company that he also chaired and partly owned.
[16:36] To help justify the deal, he staged a public demonstration of
[16:40] Solar City's Solar roof tiles during the acquisition
[16:43] negotiations. The tiles were later found by a
[16:47] Delaware court to have been actually inoperable and far from
[16:51] ready to go to market at the time of the demonstration.
[16:54] The court reviewed the entire transaction under it's strictest
[16:58] standard of scrutiny, describing the process as deeply flawed,
[17:03] noted Musk's apparent inability to acknowledge his clear
[17:06] conflict of interest, and then found the deal entirely fair
[17:11] anyway, largely because 85% of the shareholders had a approved
[17:15] it and Tesla stock subsequently went up.
[17:19] The judge declined to award Musk his legal costs, which is the
[17:24] Delaware Court of Chancery's version of a strongly worded
[17:28] letter. Musk later had a falling out
[17:31] with Delaware over his Tesla pay package and reincorporated in
[17:35] Texas. He has now completed a
[17:37] structurally similar acquisition, this time of XAI,
[17:41] in a state with far more LAX securities rules.
[17:45] In Texas, to bring a derivative lawsuit against SpaceX, a
[17:48] shareholder must own at least 3% of the company.
[17:52] At the current valuation, that's approximately $52 billion worth
[17:57] of stock. To win any lawsuit, they must
[18:00] prove not just a breach of fiduciary duty, but specifically
[18:04] fraud, intentional misconduct, or a knowing violation of law.
[18:09] A conflicted transaction, even one with no independent
[18:13] oversight whatsoever, does not meet that standard on its own.
[18:18] And if you wanted to go looking for the internal emails that
[18:21] might help you to prove fraud, as shareholders did so
[18:24] effectively in Delaware, Texas corporate law now explicitly
[18:29] excludes emails and text messages from shareholder
[18:32] document requests. When Tesla reincorporated in
[18:37] Texas, Governor Greg Abbott posted on Twitter to personally
[18:42] congratulate Musk and wish him well, which gives you a
[18:45] reasonable sense of the regulatory environment.
[18:49] The lesson that Musk appears to have drawn from Solar City is
[18:53] not don't do conflicted acquisitions, it's do them
[18:57] somewhere with friendlier corks. The clearest beneficiaries of
[19:01] this acquisition are not the SpaceX engineers trying to get
[19:05] to Mars. They're the venture capitalists
[19:07] and banks, including Morgan Stanley, who were at first stock
[19:11] holding billions in underwater debt from Musk chaotic buy out
[19:15] of Twitter. Thanks to the XAI SpaceX merger,
[19:19] those lenders have been made whole in SpaceX equity,
[19:23] conveniently timed just before the largest IPO in history.
[19:27] Now, historically, investment bankers won IPO mandates by
[19:32] demonstrating deep sector expertise, long term advisory
[19:36] relationships, and a willingness to work extremely long hours.
[19:40] It used to be quite a dignified business.
[19:44] The first sign of slipping standards in investment banking
[19:47] came in 2007 when the Goldman Sachs bankers who were pitching
[19:51] for the Lululemon IPO mandate turned up to the meeting led by
[19:56] David Solomon, also known as DJ Diesel, dressed head to toe in
[20:01] Lululemon at leisure wear. I want to be clear here, this
[20:06] slipping standards may well have been the event that triggered
[20:09] the global financial crisis that year.
[20:12] DJD Salter, bad boy of corporate finance this time around,
[20:17] boasted to the press that he secured the lead left position
[20:21] on the largest IPO in history by having his staffers help him
[20:25] send Elon Musk a direct message on Twitter.
[20:29] Morgan Stanley, which had cultivated A Musk relationship
[20:32] for years through their star tech banker Michael Grimes, is
[20:36] listed as Co lead. Their name appears second in
[20:40] alphabetical order, directly after Goldman Sachs.
[20:44] Morgan Stanley was apparently so furious about this that they
[20:48] forced SpaceX to explicitly clarify in the term sheet that
[20:52] the listing is purely alphabetical. 23 banks have
[20:57] cramped their names onto the cover of this prospectus.
[21:00] The fees constitute the most lucrative Wall Street IPO payday
[21:04] ever. The only evidence of enterprise
[21:07] usage of Musk's Grok AI may well be the millions of dollars of
[21:12] licenses that Musk is forcing on his lead IPO banks.
[21:17] All of this brings us to the corporate governance structure
[21:20] of SpaceX, which is perhaps the most heavily fortified
[21:24] dictatorship ever brought to US public markets.
[21:28] The company will have a dual class share structure.
[21:31] Regular investors will get Class A shares, which carry one vote,
[21:36] and Elon Musk gets Class B shares, which carry 10 votes
[21:39] each. While Musk only owns around 41%
[21:43] of SpaceX, he will control more than 85% of the votes, meaning
[21:48] that he can't ever be fired by shareholders.
[21:51] The company has also placed limits on how shareholders can
[21:55] file legal challenges, as SpaceX writes in the prospectus.
[22:00] This will limit or preclude your ability to influence corporate
[22:04] matters and the election of our directors.
[22:07] On top of that, because Elon must convince NASDAQ to change
[22:11] their index inclusion methodology in order to win this
[22:15] listing, SpaceX will be fast tracked for inclusion in the
[22:18] NASDAQ 100 index. This is a massive deal.
[22:23] The NASDAQ 100 is tracked by over $600 billion of passive
[22:27] investor money. By fast tracking SpaceX into the
[22:31] index, countless pension funds and passive investors will
[22:35] become forced buyers of the stock almost immediately, long
[22:39] before there's any serious price discovery.
[22:43] And they'll own shares in a heavily cash burning company
[22:47] where they've no voting power and no meaningful ability to sue
[22:51] management. Musk has ensured that he will
[22:54] never lose his control over SpaceX.
[22:57] The filing reveals the creation of a new Class C non voting
[23:02] stock. This exists so that SpaceX can
[23:05] acquire other companies in the future using that stock without
[23:09] ever diluting Musk's voting power.
[23:12] And if he ever decides to step down, he can place his super
[23:16] voting shares into trusts, passing those super voting
[23:19] shares onto his children, ensuring dynastic control.
[23:25] Finally, we get to his compensation package.
[23:28] You've most likely read about how Musk is getting 1 billion
[23:32] performance based restricted shares, and how these shares
[23:36] only vest when SpaceX establishes a permanent human
[23:40] colony on Mars and hits a 7 1/2 trillion dollar market cap.
[23:46] SpaceX explicitly describes the achievement of these milestones
[23:49] in the prospectus as being improbable.
[23:53] To be clear, this is not a sudden burst of candor from
[23:57] management. It's instead a bit of an
[23:59] accounting trick. Under accounting rules, if the
[24:02] company admitted that it was probable that Musk would get
[24:06] these shares, they would have to expense the full value of the
[24:09] award, potentially hundreds of billions of dollars, on their
[24:13] income statement today. By categorizing the share grant
[24:17] as improbable, it gets booked at 0 cost.
[24:21] But there's a trick. As law professor Anne Lipton
[24:24] points out, Musk doesn't actually need to achieve any of
[24:28] those hard to reach goals. He gets the utility of these
[24:32] shares immediately. He can vote them today.
[24:35] He can collect dividends on them today.
[24:38] And with the approval of a board that he entirely controls, he
[24:42] can pledge them as collateral for loans to get access to tax
[24:46] free cash. Today he gets all the benefits
[24:49] of owning the shares immediately, based on a Mars
[24:53] colony that the company admits he will probably never build.
[24:57] Now possibly the most extraordinary line in the entire
[25:00] prospectus is this. SpaceX renounce certain
[25:05] corporate opportunities that may be presented to Mr. Musk and
[25:09] certain of our directors and their respective affiliates, and
[25:13] such persons may have no duty to present such opportunities to
[25:17] us. What this means is that nothing
[25:20] stops Elon Musk from setting up a separate private company
[25:24] tomorrow to pursue whatever the next big tech trend is, rather
[25:29] than doing it inside SpaceX. Which, if you remember him
[25:33] claiming Tesla was an AI company and then immediately starting X
[25:37] AI as a separate competing private entity is a fairly
[25:41] relevant risk. As I'm Lipton summarized it,
[25:45] public shareholders in SpaceX will have no votes that matter,
[25:49] no ability to sell at a fair price discovered through normal
[25:52] market mechanisms, and no ability to sue the company for
[25:56] wrongdoing. No votes, no sales, no suits.
[26:01] There's one technology at SpaceX that everything else depends on.
[26:06] Not the AI, not the satellite Internet, not the Mars colony.
[26:10] One rocket. Starship, the largest rocket
[26:14] ever built, is supposed to be the key to everything.
[26:18] Cheaper launches, bigger Starlink satellites, orbital
[26:21] data centers, a city on Mars, the NASA contracts.
[26:25] Without Starship, the entire $1.75 trillion story falls apart
[26:31] entirely. Yesterday, Barron's wrote that
[26:34] the Starship launch was a bigger deal for SpaceX than the IPO
[26:38] filing itself. The latest version of the rocket
[26:41] was supposed to launch before the IPO filing, but that launch
[26:46] was postponed. It was then supposed to launch
[26:48] yesterday, the day after the filing.
[26:51] Nicki Minaj even turned up to watch, but there were technical
[26:55] difficulties, according to the news.
[26:57] They're going to try again today, so we'll have to see how
[27:01] that go. The problem so far is that
[27:04] Starship hasn't yet worked. It's still in the rapid
[27:08] unscheduled disassembly phase of its development.
[27:11] It is yet to carry any cargo to orbit other than the banana.
[27:15] So as Barons rightly states, this launch is really going to
[27:19] matter. The entire investment pieces is
[27:22] built around Starship achieving what SpaceX themselves call an
[27:27] insane flight rate. Hundreds of launches per year,
[27:30] each carrying 200 tons into orbit.
[27:34] Starlink version 3 satellites, which are supposed to provide 20
[27:38] times the capacity of current models, are too large for the
[27:41] existing rockets and require Starship.
[27:44] The Orbital Data Center concept requires Starship to launch
[27:49] 1,000,000 satellites. The Mars colony requires
[27:52] Starship to work reliably enough to transport 1,000,000 people
[27:56] who I guess want to go there. If Starship fails to deliver, if
[28:02] the flight rate is half of what is promised, if the reliability
[28:06] is lower, and if the costs are higher, the entire valuation
[28:10] collapses. The $1.75 trillion number
[28:14] assumes Starship works exactly as advertised, on schedule, with
[28:19] no technical setbacks. History suggests that rockets
[28:23] rarely work exactly as advertised, so the company
[28:27] claiming to be worth $1.75 trillion is depending on a
[28:32] rocket that is yet to figure out how to land without exploding,
[28:36] which is a risk. Now, IPO prospectuses are
[28:41] required to tell investors specifically what the company
[28:44] will do with their money. This is called the use of
[28:47] proceeds. A piece by Cape Fear Advisors
[28:51] points out how hard you have to dig, including through the
[28:54] footnotes, to grasp the full picture of Spacex's use of
[28:58] proceeds. The IPO is expected to raise
[29:01] between 50 and $75 billion. When you add up all of the
[29:05] commitments buried in the document, the company needs
[29:09] approximately $235 billion over the next few years, between
[29:14] three and five times the IPO proceeds.
[29:18] What this means is that the IPO is not the end of fundraising,
[29:22] it's just the beginning. Matt Levine summed up how
[29:26] investors should think about this vibes based investment.
[29:29] In his Money Stuff newsletter, he writes if you're buying
[29:33] SpaceX stock to tell Elon Musk what to do, you should stop.
[29:37] If you're buying SpaceX stock because you want exposure to the
[29:41] space AI business but you have your doubts about current
[29:45] management, you should stop. If you're buying SpaceX stock
[29:49] because you like Elon Musk and want to go along for the ride
[29:52] with him, yes, that's correct. That's the investment thesis
[29:57] here. If later you're disillusioned
[29:59] with Elon Musk, if you feel that you were misled that he didn't
[30:02] do the stuff he promised to do, well, that's kind of his whole
[30:06] thing. Thanks for tuning into this
[30:08] week's podcast. If you found it interesting, I'd
[30:10] really appreciate a five star rating or a short review on
[30:14] whatever podcast app you use. It really helps the podcast to
[30:18] grow. Have a great week and talk to
[30:20] you again soon. Bye.

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