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Thursday, Dec 7, 2023

How SpaceX Can Live Up to Its $100B Valuation

Less than a month after sending four civilians on a historic three-day journey around the Earth, Space Exploration Technologies Corp. reached another milestone: a valuation of more than $100 billion.
The Hawthorne-based aerospace company is now worth $100.3 billion, CNBC reported Oct. 8. This valuation is up from $74 billion in February, making SpaceX the second-most valuable private company in the world.

Anonymous sources familiar with the deal told CNBC SpaceX agreed with investors to sell up to $755 million in stock at $560 a share, up 33% from $419.99 a share from its last valuation in February.

With its new valuation, SpaceX is second only to ByteDance Ltd., the Beijing-based parent company of popular video sharing app TikTok, which has a valuation of $140 billion, according to business analytics platform CB Insights. TikTok’s U.S. base of operations is in Culver City. SpaceX’s astronomical valuation bumps San Francisco-based financial technology giant Stripe Inc., which is worth $95 billion, down to third.  

SpaceX did not respond to requests for comment on the valuation.
“They’ve had investors over time who have viewed where the company has been and heard the discussion about where the company’s going,” Rich Leshner, vice president of consulting for analytics firm BryceTech, said. “There’s been nothing to show that they haven’t made a wise investment yet.”
The news follows a Sept. 27 report by Forbes that SpaceX founder Elon Musk overtook Jeff Bezos, founder of aerospace company Blue Origin, as the world’s richest person with a personal net worth of $203 billion. Musk gained $3.8 billion that day as share prices in his electric vehicle company Tesla Inc. rose 2.2%.

As the company continues to spread into every facet of the aerospace industry, SpaceX and Musk have gained prestige among clients and investors — and not just for its high valuation.
“They’ve got a lot of irons in the fire, and they seem to have a knack for knowing how to make things pan out,” said Leshner. 

Cost-efficient moneymaker

Much of SpaceX’s business comes from satellite launch services. The company claims to provide affordable launch services, with spots on its Falcon 9 rideshare missions starting at $1 million for satellites weighing up to 200 kilograms, or 440 pounds. The company’s rideshare clients include Earth-imaging company Planet Labs Inc., satellite company Loft Orbital Solutions Inc. and telecommunications company Kepler Communications Inc.
Most recently, Torrance-based Varda Space Industries Inc. chose SpaceX to launch its in-space manufacturing vehicle aboard the company’s Falcon 9 rocket for a rideshare mission planned in 2023. It will be Varda’s first time sending one of its spacecraft into orbit. Financial details of the agreement were not released.

“I’m excited to use SpaceX as our launch provider because their reusable launch vehicles have proven to be highly reliable and cost-efficient,” Varda founder and Chief Executive Will Bruey said in an Oct. 11 statement announcing the launch.

While SpaceX has raked in revenue from its satellite and spacecraft ridesharing, the company has also scored millions in dedicated launch contracts from major organizations such as NASA, Space Force and the Defense Department.

SpaceX started in a “small corner” of the aerospace industry by providing launch services when the company was in its early days, Leshner said, but it has made a name for itself by growing in several aspects of aerospace and becoming a trusted contractor for major government entities and companies.
“They got there by having people who built stuff that works,” Leshner said.

The long shot

Along with launching satellites into orbit for clients, SpaceX has also bet big on its own satellite constellation, Starlink.
With its network of more than 1,700 satellites in orbit, Starlink provides internet to nearly 100,000 customers. SpaceX has a Starlink order backlog of 600,000 customers and aims to deploy a total of more than 4,400 satellites into orbit for the program by 2024, which could cost up to $30 billion.

The company is working to decrease the manufacturing cost of Starlink terminals as it’s reportedly losing money: Each one costs around $1,000 to make but retails for $499.

Despite the steep cost of building out the program, however, the company is expecting to make as much as $30 billion annually once the Starlink constellation is completed.

“If you can get that user terminal cost down, that’s really the Holy Grail for the consumer side of the business,” SpaceX Chief Financial Officer Bret Johnsen said during a panel at the Satellite 2021 conference on Sept. 7.
And SpaceX is sending more than just satellites into orbit. The 
company is racing to fulfill its core mission of advancing human spaceflight.
SpaceX made history in September by sending the first all-civilian crew into space on its Inspiration4 mission, a three-day journey around the Earth.

The company has also won competitive, highly valued contracts from NASA to work on the Artemis human lunar lander project, which aims to use the SpaceX Starship to land Americans on the moon for the first time in 50 years. However, a lawsuit filed against NASA by Blue Origin, which claims the contact was awarded unfairly, forced NASA to put the project on hold.

Hitting the mark

Though SpaceX has made major headway in several of its businesses, the company now must deliver on its massive valuation.
But with its recent track record of contracts and launches, Leshner said, the company isn’t likely to have its valuation downgraded.

“Succeeding is much more likely than failing if the question is, ‘Are they going to live up to it?’” he added.  
It isn’t easy to predict SpaceX’s next move, though, he said. With Musk moving electric vehicle-maker Tesla’s headquarters to Austin, Texas, and SpaceX upping its operations at its Starbase launch site in Boca Chica, Texas, it’s possible SpaceX might relocate its headquarters out of the California, Leshner said. However, it isn’t likely that a move would decrease the manufacturing operations at its current home base in Hawthorne, he added.

“They’ve got a pretty significant capacity in Southern California for SpaceX’s manufacturing,” Leshner said. “I wouldn’t think that a (headquarters) move would mean some sort of drastic change.”

And even though SpaceX’s competitors like Rocket Lab USA Inc., Virgin Orbit and Virgin Galactic have made or announced stock market debuts in recent years, Leshner said he doesn’t expect SpaceX to follow in their footsteps. With $6.6 billion raised to date, the company doesn’t have trouble raising capital, one of the main benefits of going public, he said.

“If you’re not dealing with the need to raise capital, why would you introduce the downsides that come along with being public into that equation when you seem to have all upside right now by being private?” asked Leshner.

Though predicting the future of SpaceX is not an easy task, Leshner said the company is far from done dominating aerospace.  
“Their investors are willing to say that they believe that the story for SpaceX’s growth isn’t over,” he said. 

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