The SpaceX Valuation Debate: Worth It or Too Expensive?

During their recent episode, Taylor, Carlisle, and Ross Glotzbach discussed The SpaceX Valuation Debate: Worth It or Too Expensive?. Here’s an excerpt from the episode:

[Tobias] Last question. What do you think about the SpaceX IPO?

[Ross] So, I did read that prospectus. And I was talking with one of our investee CEOs about it last week because he asked the same question. I think a lot of people are wondering some of this.

First of all, we need to give credit for Elon Musk having built a lot of things that are real businesses that have generated revenue and have the prospect of generating free cash flow. On the other hand, I’m having a hard time justifying this valuation. I think Starlink is a business that should generate free cash flow over the long term, although it’s a very hard business to gauge the real free cash flow power of it because satellites depreciate and launch costs can fluctuate.

And so that Starlink business is worth a hearty number, but you have to assume a whole lot of other things happening to get anywhere close to $2 trillion, let alone $1 trillion in my opinion. So, I think it’s not a price that we would pay, assuming it goes off at this price. It was an interesting market moment last week.

People were like, oh, stocks are down because Broadcom had a disappointing quarter or something. Stocks might have been down even more because of what the S&P 500 did when it didn’t change its rules to take it after NASDAQ did go through a bunch of gymnastics to make sure that SpaceX and probably the next two would be in there. That was an interesting decision by the S&P 500.

Again, who knows if that’ll even stick, right? Maybe it’s being lobbied in some back room right now to go on in there and we don’t know. It needs 10 days at least.