SpaceX Stock: When Can You Invest in It?
“I think fundamentally the future is vastly more exciting and interesting if we’re a spacefaring civilization and a multiplanet species than if we’re or not. You want to be inspired by things. You want to wake up in the morning and think the future is going to be great. And that’s what being a spacefaring civilization is all about.” The quote is from Elon Musk, the visionary mind behind SpaceX. Elon Musk (who is also famous for his Tesla brand of electric vehicles) established SpaceX in 2002 with the aim to change space technology and open up the world of space exploration to non astronauts as well. After much speculation and guessing around SpaceX’ future, the firm did manage to complete a successful test launch and the future looks very bright. Going forward, just like Elon Musk’s other firm Tesla, SpaceX seems to be a good firm to buy stocks of. However, can you actually do it? Let’s find out.
SpaceX Stock: Important Things To Know
SpaceX Stock: Can you buy it?
According to Amazon’s “competitive intelligence tools” subsidiary Alexa, SpaceX’s website had just become one of the most popular corporate websites among privately held companies. The steep rise in “unique visitors” hinted at the fact that a lot of people were looking towards SpaceX as the next “unicorn stock”. However, currently the Hawthorne, California based SpaceX has roughly 7,000 employees and remains a private company. This means its stock isn’t available for buying in any stock market as of now. Here’s what founder Elon Musk had to say about the early days of SpaceX.
“We [SpaceX] started off with just a few people who really didn’t know how to make rockets. And the reason that I ended up being the chief engineer or chief designer, was not because I want to, it’s because I couldn’t hire anyone. Nobody good would join. So I ended up being that by default. And I messed up the first three launches.”
Musk also spoke about the more long term goal and vision of the firm right from the outset:
“When starting SpaceX I thought the odds of success were less than 10%, and I just accepted that I would probably just lose everything. But that maybe we would make some progress. If we could just move the ball forward, even if we died some other company could pick up the baton and keep moving it forward. So that would still do some good.”
SpaceX was initially funded by Musk himself. He used most of the money he received from the sale of PayPal as capital for the project. SpaceX also received funding from Founders Fund, Draper Fisher Jurvetson and Valor Equity Partners.Google and Fidelity invested $1 billion for a stake of just under 10% in 2015.
“My proceeds from the PayPal acquisition were $180 million. I put $100 million in SpaceX, $70m in Tesla, and $10m in Solar City. I had to borrow money for rent.”
One of the most innovative things done by SpaceX is definitely their work towards developing reusable booster rockets. Normal booster rockets can only be used once. SpaceX claims that its booster rockets can be used 10 times. However, none have been flown more than thrice. Musk said: “Rockets are the only form of transportation on Earth where the vehicle is built anew for each journey. What if you had to build a new plane for every flight?” The company’s Falcon 9 spacecraft costs $62 million to book, while a mission using the Falcon Heavy costs $90 million. Musk’s intrepid nature towards trying new things can probably be attributed to this quote:
“When I was a little kid, I was really scared of the dark. But then I came to understand, dark just means the absence of photons in the visible wavelength–400 to 700 nanometers. Then I thought, well, it’s really silly to be afraid of a lack of photons. Then I wasn’t afraid of the dark anymore after that.”
Should you invest in SpaceX?
All of the companies involved with space exploration seem to be small, niche firms. There is a reason for that. Space by its nature is risky, and expensive. SpaceX has experienced a number of high-profile mishaps on its way to getting an astronaut into orbit. Testing and failure are parts of the development process. That is a tall order for most small companies who always seem to be strapped for cash. However, Musk does see a strong growth potential in his firm and the field in general:
“SpaceX is only 12 years old now [as of 2014]. Between now and 2040, the company’s lifespan will have tripled. If we have linear improvement in technology, as opposed to logarithmic, then we should have a significant base on Mars, perhaps with thousands or tens of thousands of people.”
A significant portion of the revenue related to space is eaten up by larger, more diversified defense contractors. The titans among American defence suppliers, tend to have their own space units. Boeing and Lockheed Martin are in a joint venture called United Launch Alliance (ULA) focused on lift and Northrop Grumman makes rockets via its Orbital ATK acquisition. Those companies, as well as others, including Raytheon Technologies and L3Harris Technologies, also make satellites and sensors that are launched into orbit.
How has SpaceX expedited manufacturing?
SpaceX can launch a rocket for $90 million, compared to $380 million charged by its rivals. The lower cost is due partly to an emphasis on in-house manufacturing. For example, instead of spending $50,000 to $100,000 to purchase radio equipment and other communications gear, SpaceX was able to develop gear in-house for $5,000. Speaking on the matter, Musk said this humorously:
“They were building a Ferrari for every launch, when it was possible that a Honda Accord might do the trick.”
Oddly enough, some people have also criticised Musk for using combustion and rockets when he also owns electric car maker Tesla. This is what he said in response:
“Sometimes I get some sort of criticism for why are you using combustion and rockets and you have electric cars. Well there isn’t some way to make an electric rocket. I wish there was. But in the long term you can use solar power to extract CO2 from the atmosphere, combine it with water, and produce fuel and oxygen for the rocket. So the same thing that we’re [going to do] doing on Mars, we could do on Earth in the long-term.”
Another reason why SpaceX can make space exploration cheaper is the fact that it’s a private company. It is free from the restrictions associated with a government bureaucracy that normally plague organizations such as NASA. This has allowed SpaceX to move much faster than traditional space programmes. Rapidly creating parts and equipment, securing launchpad sites, and hiring employees from competing companies and universities.
Don’t expect that to change anytime soon. After becoming the first private company to put a spaceship in orbit, Elon Musk’s groundbreaking space venture has proceeded to rack up an impressive list of other “first” achievements: First company to launch a payload into orbit, then land its rocket back on Earth. First to land a Falcon 9 rocket on a landing pad at sea. First to re-launch a used rocket, and first to put forth a workable plan for colonizing Mars. If all goes well, SpaceX could even become the first company to re-land three boosters from its Falcon Heavy rocket — simultaneously. Musk’s dream of inhabiting Mars might become a reality soon.. Here’s what he said his plan is:
“You need to live in a dome initially, but over time you could terraform Mars to look like Earth and eventually walk around outside without anything on… So it’s a fixer-upper of a planet.”
Will SpaceX release an IPO soon?
The question on every savvy investor’s mind is “Will SpaceX become the first space company to conduct a big IPO in the 21st century and give investors a chance to invest in its stock directly?” As of now, Musk has shown reluctance towards that. During a conference in Guadalajara, Mexico, Musk said that he was not interested in raking in billions by putting SpaceX on the stock market. To the contrary, Musk said that it was actually his biggest fear that SpaceX might “somehow get taken over by investors who just want to maximize the profit of the company and not go to Mars.”
That statement has spurned the plans of investors hoping to one day invest in SpaceX stock. However, just because SpaceX isn’t planning to release an IPO, doesn’t mean you can’t invest in it.
Is there a way to invest in SpaceX stock?
You can invest in it indirectly. You can thank Google’s 2015 investment in SpaceX for that. As a result of that investment, Google parent Alphabet now owns a 7.5% stake in SpaceX. What that means is that you can indirectly invest in SpaceX by investing in its minority owner, alphabet. With that investment, you will stand to benefit indirectly from the increase in value of SpaceX over time.
At the right price, buying Alphabet stock in order to own SpaceX stock might even be a smart financial move. Consider: In 2016, we learned that after several years of boasting that it was both “profitable and cash-flow positive,” Space X in truth wasn’t either of those. It was just burning through cash as a matter of fact. That’s a kind of stock, investors generally run away from. SpaceX’s resurgence in 2017 may have improved the company’s financial fortunes, or it may not have. So far, SpaceX isn’t telling. But just in case SpaceX is still losing money, diversifying one’s investment in SpaceX by also owning wildly profitable Alphabet stock is a smarter way to own a piece of SpaceX.
Valued at $735.8 billion today, Alphabet reported net income of $12.7 billion over the past 12 months, despite taking a big hit from tax reform. Google’s actual cash profits — its free cash flow — are even stronger. According to data provided by S&P Global Market Intelligence, over the past year Alphabet has generated $23.9 billion in positive free cash flow, which is nearly twice its reported profit. The cash pile up on the balance sheet has led to the shrinking of the enterprise value of Alphabet stock, to the point where the whole company, net of cash, now costs less than $638 billion, or about 26.7 times trailing free cash flow. Admittedly, even 26.7 times FCF isn’t a particularly cheap way to invest in SpaceX stock. But neither is it unreasonably expensive. The most important reason though, is the fact that it’s the only way in which you can invest in SpaceX. And considering the future, SpaceX seems like a good place to invest money. We’ll leave you with this quote by Musk on the future of SpaceX and space exploration in general: “We’ll go to the moons of Jupiter, at least some of the outer ones for sure, and probably Titan on Saturn, and the asteroids. Once we have that forcing function, and an Earth-to-Mars economy, we’ll cover the whole Solar System. But the key is that we have to make the Mars thing work. If we’re going to have any chance of sending stuff to other star systems, we need to be laser-focused on becoming a multi-planet civilisation. That’s the next step.”