Elon Musk will go down as one of the greatest visionaries of this generation. The billionaire has made most of his wealth through Tesla, the automobile company that he bought and transformed into the world’s most valuable car brand and a pioneer of the electric vehicle movement.
However, Musk could very well have two companies going public very soon. Last month, Musk confirmed that one of his projects was considering going public, although he added that the timing wasn’t quite right.
While many would think that the logical choice will be SpaceX, Musk was actually referring to Starlink - the internet project that SpaceX runs. For those who might not know, Starlink looks to make fast, cheap internet available to consumers, helping them connect to the net via a satellite dish placed close to or on their property. The dish gets a connection through Starlink satellites that move in space.
In a series of tweets last week, Musk explained that SpaceX hopes that taking Starlink public will be possible. However, the billionaire pointed out that they will need to properly predict the project’s cash flow. An Initial Public Offering (IPO) will make Starlink an independent company and open the company to public investment.
Musk explained that Starlink will need to “pass through a deep chasm of negative cash flow” to be eligible for an IPO. The billionaire added that this should take about a year, after which they will revisit the public offering plans and see how best to move forward.
IPO Talks Have Come Before
SpaceX definitely understands the value of Starlink. Last year, Gwynne Shotwell, Starlink’s president, explained that an IPO for the division will most likely take it out of SpaceX entirely. At an investor event, Shotwell explained:
"Starlink is the right kind of business that we can go ahead and take public. That particular piece is an element of the business that we are likely to spin out and go public."
There is no doubt that Starlink has the right type of business model to go public. Internet connectivity remains a significant requirement around the world, and everyone - from private individuals and companies to governments - will be looking to get in on this market. By providing the services that everyone needs, Starlink could find itself in a significant productivity position.
Starlink has also made significant progress. The project already has over a thousand working satellites in orbit, all launching via reusable Falcon 9 rockets from SpaceX. The objective is to place up to 42,000 satellites in space by the middle of 2027, creating an umbrella of high-speed internet that will encompass the entire planet.
According to estimates from experts and Musk himself, success with Starlink could also bring up to $50 billion in annual revenue. For now, however, it appears that predicting cash flow and revenues will be paramount to Musk and SpaceX if they hope to get Starlink in a position where going public makes the most sense.
Starlink Remains SpaceX’s Golden Goose
For now, Starlink is still a part of SpaceX - and the most valuable part of the private company, according to analysts. In June 2020, Adam Jonas, an analyst at Morgan Stanley, estimated that Starlink was worth about $42 billion. As for SpaceX, the company is currently worth about $74 billion, making it a top-five company in the defense and aerospace industry - even without an IPO.
For instance, SpaceX is more valuable than names like Northrop Grumman. Northrop currently holds a market cap of about $60 billion, while its enterprise value (which calculates stock and debt) takes it as high as $70 billion.
SpaceX is the Big Gun
As for SpaceX itself, an IPO has also been floated - although not by the company or its top brass. The company has raised $1.16 billion in fresh capital this year alone, with many suggesting that it could have raised much more. With a market value currently standing at twice what it was just a year ago, SpaceX is the juggernaut forming in the aerospace industry.
Musk and other top officials don’t seem to be in such a rush to make SpaceX a public company. Of course, why would they? The company has contracts lining up as far as the eye can see, and it has solidified itself as NASA’s most important private contractor. Running to make the company public will simply put a cap on its potential, and no one wants that.