SpaceX IPO: What Is So Exciting?
1.) Connectivity: I see a connectivity businesses that is priced 50% higher than competing consumer broadband connectivity services. Connectivity accounts for approximately 60% of SpaceX Consolidated Revenues and generates all SpaceX profits. Yet, the Connectivity business isn’t allowed to flourish because it must subsidize the AI and Space divisions.
What multiple does one apply to the Connectivity business ($7.2B of Adjusted EBITDA in FY 2025), when one knows it is saddled by two other business units? Connectivity is growing rapidly, but probably has a limited market given its price point. 15X - 20x Adjusted EBITDA? Pick a number. I would go low, but even if I lost my mind and was willing to pay 20x for a BU that only exists to subsidize two weak BUs, a 20x multiple implies a price of $144 billion.
2.) Space: $4 billion of revenue and $650 million of Adjusted EBITDA for a quasi-Government operation. Fun technology, but what is to be excited about as an investor?
3.) AI: The old xAI business was a shit business from day one. I never counted xAI among the frontier model providers despite Musk’s rhetoric. I was correct because Musk quit the AI model business in case you hadn’t noticed. Rather than allocate GPUs to Grok, Musk decided to rent GPUs to Anthropic several weeks ago and to Google Deepmind last week. That means xAI has thrown in the towel on the model business. Renting GPUs is a good business, just ask Google Cloud, AWS and Azure. So perhaps xAI will throw off a profit in the future, but at present it is essentially a flat topline, money-losing business that just quit the model business and is an upstart in Cloud. What does one pay for that?
Where does the $1.75 Trillion valuation come from? I can’t even get to $150 billion.
Here are some numbers: SpaceX