(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Robert Cyran
NEW YORK, April 21 (Reuters Breakingviews) - The largest initial public offering in the universe comes with galactic question marks. Elon Musk has decided that SpaceX should be worth $1.75 trillion when it sells shares to public investors. Yet its rocket, satellite and artificial intelligence businesses at best explain a bit more than half that sum. To justify the astronomical price tag, the company and its investment bankers can only point to the tech tycoon’s imagination. SpaceX’s IPO filing is still confidential, so financial information about the company’s performance remains sparse. The basic details which have dribbled out aren’t impressive enough to justify the hoopla. Revenue exceeded $18 billion last year while the business made a net loss of $5 billion, The Information reported, citing two people familiar with the figures. In simple terms, the mooted IPO price implies a stellar multiple of about 100 times historical revenue for a company still deeply in the red. Some unusual IPO wheezes might tempt investors to climb on board. SpaceX aims to sell shares worth $75 billion, an uncommonly small proportion of less than 5% of the company’s overall value, while allocating an atypically large chunk of up to 30% of the shares to retail investors. Index providers are tweaking inclusion rules so that passive funds will add SpaceX shares to their portfolios sooner than normal, further juicing demand.
Eventually, though, investors will decide whether SpaceX’s business and prospects justify the valuation. To tackle that question, it helps to think about the company as containing four buckets. SpaceX makes rockets, runs satellite network Starlink, and – following a merger earlier this year – owns the AI firm xAI. The fourth pail contains Musk’s imagination.
Start with rockets. Musk claims SpaceX carries 90% of all mass currently being thrust into orbit. It has gained this position by reducing costs through efficient manufacturing and improved launch vehicles. It currently charges around $1,500 per kilo to bring an object to orbit. Musk’s goal is to lop a zero off that figure and tap new markets with its newest rocket, which is undergoing tests.
Putting a figure on that extra demand is tricky. While the number of launches increased by nearly a quarter last year to a record 165, most of the increase came from Musk’s own satellites.
Lower costs may attract more would-be space explorers. But rocket revenue was perhaps $4 billion last year and SpaceX has historically run the business at around breakeven. Rival Lockheed Martin (LMT.N) is valued at two times estimated revenue. Even if the unit’s growth prospects deserve a much higher multiple of, say, five times revenue, the resulting $20 billion price tag is a rounding error in SpaceX’s valuation.
The rocket business is, however, a critical underpinning for the company’s satellite network, which provides connectivity in hard-to-reach parts of the world. Starlink is projected to collect $20 billion of revenue this year, estimates researcher Quilty, over 50% more than it earned in 2025.
One way to think about Starlink is as a pioneer in a new communications market. Back in 1990, mobile phone operators were growing quickly and highly profitable. At the time, Vodafone was valued at about eight times revenue. The comparison is imperfect, as Starlink’s margins after accounting for satellite depreciation are unknown. Yet the unit has yet to face real competition; Amazon.com’s (AMZN.O) rival LEO service will not start until this summer. Musk may therefore have the dominant position in what could be a bigger market. Generously assume that this business merits a multiple of 32 times historical revenue and it would be worth around $640 billion. Finally there’s xAI, which last year absorbed Musk’s X social network. It burned about $8 billion in nine months of last year according to Bloomberg, though it still lags rivals like OpenAI and Anthropic. Valuing these startups is a guessing game, but assume xAI is worth the $250 billion value that Musk put on the business when he merged it with SpaceX.
The IPO prospectus will have up-to-date financial data, and information on margins, depreciation, and capital expenditure. Even so, those disclosures are unlikely to change the big picture, which is that SpaceX’s existing businesses explain little more than half the mooted $1.75 trillion valuation. The real excitement for investors lies in Musk’s fantastical ideas. Locating data centers in space, for example, has the appeal of limitless solar power. Musk said in January that server farms in orbit could become more cost effective than the terrestrial varieties in “two to three years”. SpaceX has filed plans with the U.S. government to operate a data center composed of up to 1 million satellites. Assume 100 kilowatts per satellite, and that’s about 10% of the world’s current data center capacity according to McKinsey estimates. If the space-based version is cheaper, there’s room for growth. Yet the cost of lifting a solar panel into space currently exceeds the value of the electricity it would generate. Google estimated in 2025 that launch costs would have to fall below $200 a kilogram for power in space to be as cheap as it is on Earth. That’s well below SpaceX’s current costs. The cost of cooling is also hefty, while the unforgiving environment means depreciation is rapid.
But what if? This is the question underpinning SpaceX. Driving down launch costs could make this and projects like zero-gravity manufacturing, space tourism, and asteroid mining feasible.
These dreams may never become economically attractive. Indeed, the value to Musk may lie in their unreality. Take colonizing Mars, which prompted him to start SpaceX. Sending humans 140 million miles to a world with a non-breathable atmosphere, deadly radiation and climate colder than Antarctica would be fantastically expensive. Musk has estimated a thousand-fold improvement in rocket technology might lower the price tag to $1 trillion. Assume in 100 years Mars is worth $70 trillion, or about the value of all listed U.S. stocks today. Apply a discount rate of 10% and the endeavor’s present value is roughly zero. Even so, the project may motivate engineers and some investors.
Musk has a record of persuading public markets to support futuristic ideas. Tesla’s value is $1.3 trillion, not because shareholders expect vastly more electric vehicle sales, but mostly due to hopes Musk will deliver humanoid robots and autonomous-driving cars. It’s unclear when either will arrive, or how big those markets might be. But Tesla investors pay up for prospect and shrug off delay after delay. They may be willing to suspend their disbelief for SpaceX. Eventually, however, Musk’s bucket of dreams will need to contain something. Follow Robert Cyran on Bluesky.
<h3>CONTEXT NEWS</h3>
SpaceX plans to have a two-day meeting with analysts starting April 21. Elon Musk’s company is seeking to sell $75 billion of stock in an initial public offering valuing the satellite, rocket and AI firm at $1.75 trillion.
SpaceX has spurred a massive increase in objects put in orbit
<img src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/BRV-BRV/xmvjqbmxapr/chart.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1420" height="918" original-src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/BRV-BRV/xmvjqbmxapr/chart.png"/>
Launch costs have been driven down over time
<img src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/BRV-BRV/egvbeqdlnpq/chart.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1420" height="884" original-src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/BRV-BRV/egvbeqdlnpq/chart.png"/>
(Editing by Peter Thal Larsen; Production by Maya Nandhini)

Elon Musk's SpaceX plans an IPO, targeting a valuation exceeding $2 trillion, potentially making it one of the world's most valuable companies. With its Starlink global network and industry-leading position in space launches, SpaceX is attracting global investor attention. Can its vision for space exploration and commercial potential support this astronomical valuation? What are your thoughts on SpaceX's future performance?

Elon Musk's SpaceX plans an IPO, targeting a valuation exceeding $2 trillion, potentially making it one of the world's most valuable companies. With its Starlink global network and industry-leading position in space launches, SpaceX is attracting global investor attention. Can its vision for space exploration and commercial potential support this astronomical valuation? What are your thoughts on SpaceX's future performance?

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