SpaceX files for IPO, which could make Elon Musk world’s first trillionaire Musk’s vision involves lunar missions, the colonisation of Mars, solar-powered data centres in space, asteroid mining and manufacturing in outer space. An IPO that, combined with his Tesla stake, may well make Musk the world’s first trillionaire, could multiply that several times over if he meets the triggers for the various incentive payments detailed in the share sale document: a market capitalisation of more than $US7.5 trillion, a permanent colony on Mars of at least a million people and space-based data centres able to deliver 100 terawatts of annual computing power. Advertisement Musk’s vision, and the price tag the IPO puts on it, is fantastical. The stuff of science fiction. But it’s in keeping with the markets’ broader approach to valuing AI companies -- a conviction, backed by trillions of dollars of shareholder value, that at some point in the not-too-distant future the companies will produce commercial models that deliver hyper-returns on the trillions of dollars of capital being sunk into the sector today. Musk’s vision, and the price tag the IPO puts on it, is fantastical. The stuff of science fiction. They may well do so, or at least some of them. The rate at which investors’ capital is being burnt by the companies, however, does underscore the risks being undertaken by those supplying that money. SpaceX’s IPO will be the biggest in global markets’ history. The previous record holder, in terms of dollars raised, was Saudi Arabia’s Aramco, which raised about $US26 billion when it listed in 2019. Aramco, which generates earnings of around $US100 billion a year, has a market capitalisation that falls within the $US1.75 trillion to $US2 trillion range being attributed to SpaceX. Advertisement Whether SpaceX is worth anything like that amount – it valued itself at “only” $US1.25 trillion in February, after it merged with Musk xAI and X. Just over a year ago, SpaceX raised funds at a valuation of $US350 billion. In March last year, when xAI merged with X, their equity was valued at $US113 billion. There have been equity raisings by SpaceX and xAI since, at ever-escalating valuations, but that’s an extraordinary rate of escalation for entities that between them, are losing money at a rate of more than $US17 billion a year – a rate that is itself accelerating. Investors, particularly retail investors – Musk is targeting an unusually high proportion of them for his IPO – have, however, consistently backed the billionaire and his eccentric, futuristic visions. SpaceX’s value will be in the eyes and hopes of the beholders and their faith in Musk, not in its businesses today. Those businesses include the profitable Starlink satellite business, which had revenues of $US3.3 billion in the March quarter, the Starship rockets that launch the satellites and are the key to the envisioned orbital data centres ($US619 million of revenue) and the merged AI and social media business ($US818 million). Advertisement Starlink generated $US1.2 billion of operational earnings in the March quarter. The rockets lost $US662 million, and AI wiped out $US6.4 billion. Not even the sky’s the limit: SpaceX. Bloomberg In that quarter, $US1.33 billion was invested in the company’s satellite business, $US1 billion in the space business and more than $US7.7 billion in AI. That underscores where the value being sought has to come from, and how challenging it will be to transform the loss-generating AI investments – spending that will quickly absorb the bulk of the new capital being raised -- into something that justifies the $US1.75 trillion value imputed to SpaceX. At present, xAI lags its competitors in the development of AI and its commercialisation. Anthropic and OpenAI, along with the listed mega techs like Google, Meta, Microsoft and Amazon, are investing far more in their models and infrastructure, and their AI tools are being more widely adopted. Musk’s xAI was, however, a late-ish starter to the AI scramble. Advertisement It’s not only the valuation that investors in the IPO will have to digest, but the company’s governance structures, which are unusual, to put it politely. SpaceX’s value will be in the eyes and hopes of the beholders and their faith in Musk, not in its businesses today. Musk, who owns about half the existing shares on issue, along with options over another 350 million, will hold 85.1 per cent of the voting power, thanks to the “B-class” shares he will hold. They have 10 votes for every A-shares’ one. Loading He alone will appoint (or remove) SpaceX’s directors, without the usual requirement for listed companies that there should be independent representation on key board subcommittees, and have the power to hire and fire the chief executive, who happens to be Elon Musk. Advertisement Ordinary investors won’t be able to challenge the company in the courts, with disputes forced into arbitration, and it will take at least 3 per cent of the voting capital for shareholders to file any motion. This will be a company where Musk’s control will be unchallengeable. Related Article