We Think the SpaceX IPO Is Overvalued

On the subject of the governance structure this [1] is worth a read ...

"The company significantly limits shareholders' rights to sue. SpaceX's bylaws will make it clear that anyone who owns shares "irrevocably and unconditionally" waives all rights to pursue a jury trial. Shareholders will also be prohibited from bringing class actions against the company, its directors, officers, controlling shareholders or bankers tied to the IPO, according to the filing.

Instead, shareholders will be subject to mandatory arbitration, which had long been illegal in the U.S. The Securities and Exchange Commission reversed its position, opens new tab in September, allowing companies to adopt mandatory arbitration policies, which are private proceedings overseen by arbitrators."

... I can't remember how much he spent in Pennsylvania but you might argue it was money well spent.

[1] https://www.reuters.com/sustainability/boards-policy-regulat...

The point of a company going public is not to just distribute possible profits among speculators, but to give the public a meaningful voice in company direction, in particular by offering escape hatches like being able to eject a CEO who's lost their mind and is no longer acting in the fiduciary best interest of the shareholders, which will so obviously happen here.

In theory (were we talking about any other man, in any other time) that's very strictly illegal with a whole area of law dedicated to it (fiduciary duty).

This is just sole proprietorship with window dressing.

If/when Musk’s misadventures turn his companies to shit, I may spare a thought for the collaterally damaged, but not a single tear will I shed for the shareholders.

1. One of Elon's companies (Tesla) bought out another of Elon's companies (Solar City) that was going bankrupt because it owed a lot of money to yet another of Elon's companies (SpaceX) [1];

2. Elon diverted $500M of NVidia H100 GPUs reserved for Tesla to xAI [2];

3. Elon made a buyout agreement for Twitter then tried to back out. Twitter sued (for specific performance) and a Delaware judge agreed. Elon completed the purchase before the court ordered him to [3]. That purchase was secured by his Tesla shares. He ran Twitter into the ground and then created xAI in 2023 [4]. Both Tesla and SpaceX "invested" billions into it. Elon ultimately used the funds to buy out Twitter at an inflated price (and still less than he paid) [5]. He ultimately then bailed out the xAI investors by having SpaceX acquire xAI [6]. IMHO this made SpaceX a significantly worse company. It was also used to inflate the value of SpaceX by using some wildly optimistic made up numbers about the AI total addressable market; and

4. The Cybertruck has been an unmitigated financial disaster. It's a terrible car and sales are awful. But that's OK because Elon uses SpaceX to buy Cybertrucks [7].

At least with the Google founders and Mark Zuckerberg, they only had one company so they weren't playing corporate shell games or using it as a personal slush fund on this scale.

[1]: https://www.nytimes.com/2026/04/24/technology/elon-musk-spac...

[2]: https://www.cnbc.com/2024/06/04/elon-musk-told-nvidia-to-shi...

[3]: https://www.npr.org/2022/10/06/1127346372/elon-musk-twitter-...

[4]: https://research.contrary.com/company/xai

[5]: https://www.reuters.com/markets/deals/musks-xai-buys-social-...

[6]: https://www.bbc.com/news/articles/cq6vnrye06po

[7]: https://www.businessinsider.com/spacex-bought-tesla-cybertru...

I'll happily take Musks proven and superior leadership with guarantees over letting the company decline chasing short term sugar hits that destroy it long term.

And it is a LOT of money that he is floating ($77B) so there have to be dumb people at scale for this to work.

I say this entirely neutrally. Some people want to invest in that—and he’s made a boatload of money for those who have thus far!—while others find it insane.

But you don’t get to buy into this and complain.

Tesla is only one administration change away from going bankrupt. Ask yourself what would happen to Tesla if BYD could freely import cars.

This might not even take an administration change. Elon very famously had a public falling out with Donald Trump, going so far as to call the sitting president of the United States a pedophile, basically [1]. Now, as a Tesla investor, what to make of this? Elon is technically risking the entire company on a childish outburst.

SpaceX at least has some competitive advantages. Falcon 9 as a launch system is unmatched. Nobody can currently compete with the track record and cost per launch (factoring in booster reuse). That may change but the next company has to compete with the Falcon 9 and develop a proven track record. Also, SpaceX is American so it has guaranteed business from the US government for national security reasons.

But, space operations are a rounding error in the valuation model for SpaceX. All of the AI stuff is bullshit, basically, particularly space-based data centers. STarlink is interesting but is dependent on Starship and will have to compete with 5G operators.

[1]: https://thehill.com/homenews/administration/5387380-elon-mus...

Technologically, will they work? Shovel enough money at the problem and there's no reason they shouldn't. Rack up some GPUs in a shipping container, attach a couple of solar panels to the outside, zip-tie a Starlink to the door. Except for the little problem of heat. Space isn't cold, it's more of a giant Thermos bottle, and they gotta park in full sunlight, which is famously the only thing supplying the heat that keeps the entire planet alive. Good luck to them with their radiator setup.

But economically? There's no chance. Too expensive to get into space, too many auxiliary systems required, no maintenance is possible, and, given the lead time of prepping payloads for launch versus the rate of new developments in AI hardware, likely badly behind the times if not outright obsolete on the day of liftoff.

There is no shortage of land despite what some in the media would have you believe. Those same solar panels work at ground level. DCs don't have to be water guzzlers or grid destabilizers. They'd be better off by every metric solving terrestrial problems for the same money.

Of course they won't work. It's ludicrous that we have to even entertain the thought of otherwise.

"Disconnected from historical valuation norms" is a more sensible statement.

The idea that the stock market is "detached from reality" is dangerous too because the stock market is...reality. People make and lose real money in it every day.

There are good arguments that the historical valuation norms are reasonable and deviation from them is "dangerous" but there's no actual law that says the stock market needs to behave according to history.

While I personally think the current behavior has significant risk, I also can't dismiss that the role the stock market plays today is different. It's not just about raising capital, providing liquidity, price discovery, risk management and building wealth, for large numbers of laypeople it's also the go-to casino (entertainment) and a platform for expression (way to express dissatisfaction with corporations, politicians, the world, etc.).

Part of the reason for this demand is the fact that index tracking funds like QQQ will be forced to buy up massive volumes of shares. Not only that but other non index tracking funds that track large cap stocks will also have to buy. Vanguard large cap for example manages trillions of dollars. That in itself will have 100s of billions worth of buy orders.

I am looking forward to buying a little piece of it. I plan on putting a couple thousand into the IPO. I view it like buying into D.D. Harriman in "The man who sold the moon." I plan on taking those shares and forgetting about them for a couple decades. Maybe leave them to my grandchildren. This is the longest of plays and I hope it works out.

Maybe SpaceX will fail, but this is the first time since I was a boy that there is any real hope that humanity will step into that future, and I want to be part of it. Maybe Musk is suckering in dreamers like me, but I'll bet on a better future. This is it. This is our shot. Godspeed.

As far as I can tell, that’s exactly how it works. Reality is investor emotions. If it shouldn’t be that, I mean the whole system needs a rework.

1) You forgot to include the actual costs of the GPUs and other equipment, you are just calculating launch costs which will always come on top of the other stuff

2) Datacenters require repairs and hands-on attention, and space provides extra challenges like radiation to deal with

3) They have not provided any evidence that they can solve the heat diffusion issue, which could kill the whole project

4) Musk's track record for outlandish tech is poor (hyperloop, fully autonomous driving, Mars trips, etc. were significantly delayed or not achieved yet), and unlike some of these other things no one else seems to think this is economically feasible

The space data center doesn't make intuitive sense to me. Why put it in space? Wouldn't it be better just... on the ground? The technology doesn't feel like it's there either, and there would be significant competition from existing or new data centers that don't have all the drawbacks of orbiting the planet.

1. The recent Iran drone attacks on AWS data centers

2. Growing anti-AI and anti data center sentiment at home, plus Larry Fink (ceo of Blackrock) in a recent interview being terrified of dissident groups using consumer drones to attack data centers.

3. Anthropic, Grok, and other AI vendors becoming more and more integrated into defense and military, plus increasingly reliance on AI for other national surveillance systems

Data centers are and will be targets, both for national military attacks as well as home grown dissident attacks, so they are proposing to move some of the critical workloads to somewhere that the only group that can attack the data center hosting the workload is a nation state with space launch capabilities. That significantly reduces the number of actors that can attack the data center. And if the US wants to they can probably bomb all the other space rocket launch facilities worldwide in less than 24 hours, leaving extremely limited capability to attack a space hosted DC.

Is it insane? Probably, but the US has done insane things with military budget before, and will continue to do so for a long time. If you are Elon, its a great time to milk that US defense budget for some more R&D, and even if the main project doesn't work out, he's still going to be able to keep some innovations within the company and apply them to Starlink and other more realistic endeavors.

1. Using one part of Musk's holdings to trick people into feeling optimistic about how it will do incest with another part.

2. Megalomania dreams of becoming the Tessier-Ashpools from Neuromancer with their private fiefdom.

Right now, 70% of the country is at least skeptical of DCs and at worst absolutely hate them. NIMBY is basically the rallying cry. That's why you go "up" (if they can make starship work). The physics is "hard" but doable, you can keep them cool enough in a sun synchronous orbit. The math pencils out. It's not my field, but back of the envelope math seems to work. Scott Manley has a video on it if you're skeptical.

But, people keep thinking about this like "return on investment" is the only thing driving this play. They're literally the only company with a mostly reusable system (unless you count that company trying in China?). They're the closest company to a fully reusable launch vehicle. They have a ton of government contracts with star shield. After Bezos' rocket blew up last week, there's basically nobody close to competing with starlink...

I am not a Musk fanboy, but, like, there is literally no other serious space competitor right now. I mean, "maybe" Boeing? But not really - they're years away...

So, like if you read about the Memphis Datacenter - Colossus I think? They're unable to get power, they're pulling in power from Mississippi to keep the thing running. You know how many times they have to ask permission for that? The infrastructure costs there just to power it start to get absurd too. Then the unending line of approvals and environmental impact studies and permits. For all the people saying, "it'd be cheaper on earth" it might be in terms of dollars, but if you can basically iterate entirely unfettered in space, it's the obvious choice if you can make it happen.

Like, seriously, go try to build something, there are a LOT of rules outside of rural areas. It's literally why my wife and I decided to build our cabin where we are building, because there were basically no restrictions. Meanwhile in town, my buddy's deck was a nightmare to permit... it was a deck, not bridge. Seriously, to all the people saying, "it's easier" go try to get something built in a big city or where you have to fight through permit hell.

These tech oligarch guys view this (I think rightly - it's one of the only things I view them as right on) as a race to AGI against the Chinese. We're in the lead right now, cool, but the Chinese have excess kilowatts and we don't. In fact, we don't have adequate power plant infrastructure at all and we couldn't get the power plants built if we wanted to (the Ezra Klein and Derek Thompson book Abundance touches on this topic if you're curious as to why). It's not going to happen.

But up? No NIMBYs in space (yet). So they're going to go where nobody will tell them "no." At least, that's what I would do if I owned a literal rocket company.

People are all looking at this stuff through the lens of "money" as if that matters hardly at all after AGI, lol. The analysts are looking at this like it's 1995. I mean, PE ratios are important, don't get me wrong, but after 2016, and Trump, and the applications of transformers, and the war in Ukraine (and current shit show in Iran), and the rising price of fuel, and, well I'll stop, the list goes on and on, but acting like the "normal" rules of investment apply is just silly. This stuff is about power, and he who controls access to orbit is worth a basically unlimited amount of money...

Do I wish it was happening differently? Yup. But hey, we decided to give up on space as a country like 50 years ago, maybe we can try to do cool stuff in space now.

And there's also bitflips. Acceptable for astronauts carrying normal laptop to watch movies, but in a data center? Solving it through redundancy easily cut the usable capacity to half, and there's not enough shielding with any competition for the payload slot.

The usual criticism of Mars colonization is maintaining a base in Antarctic is already a heroic effort despite being relatively easier. Google and Microsoft mostly abandoned their "data center underwater in nearby shore" plans even though in those the tech would've only sat for few minutes going down or alternatively waiting for the problematic module being floated to the surface.

Shouldn't your concern be whether it's true? Who asks to be "convinced?"

That’s why we are seeing pushes for regulatory capture, safety fear mongering, large government contracts, and even potentially the government taking stakes in these companies. It’s a sprint to cash out before they get commoditized.

This article is just about the making money part.

Further, space is just reaching the point it can really grow.

Space is strategically important but perhaps not as directly economically valuable as Microsoft yet, and SpaceX is just a fraction of that value.

The real immediate economic value hasn't really changed for decades. Starlink is the most recent significant innovation in that area, and it's worth less than 3% of Google's revenue.

The hyped up reasons for space mattering are all completely speculative and at the limits, stretch the bounds of a sane person's credulity: asteroid mining - ok, there may be an economic case for that, but it's far future; colonies on the Moon and Mars - there's no economic case for those, it's purely a dubious expenditure of tax dollars that has no meaningful economic purpose. Etc.

So, what makes spaceflight "important" beyond what it's already used for and has been used for, for decades?

Are these kinds of reports mostly a lot of window-dressing around a gut-feel about what might happen in the future? Yea, of course. But, there's not really other options. Pretty much all the other options for predicting how much money a particular company is going to make in the future will also boil down to a gut-feel.

otherwise using ROIC or CAGR might be more optimal way to evaluate your investments