SpaceX IPO: Nice Try Though

When a company decides to go public they're required by the Securities and Exchange Commission to file an S-1 prospectus. Historically these are some of the driest documents ever committed to paper. They're written by corporate lawyers for other corporate lawyers to ensure that no one anywhere is ever accidentally entertained. But two days ago SpaceX filed its paperwork to go public and reading through it it became immediately clear that this was not going to be your typical legal disclosure. For a start it opened with 14 pages of photographs of rockets and satellites which reminded me of Adam Neumann's ill-fated WeWork prospectus which famously opened with the line we dedicate this to the energy of we greater than any one of us but inside each of us. That document was later described as one of the worst IPO filings in Wall Street history. The SpaceX prospectus is similarly unconventional though I will say the rockets are more photogenic than the WeWork community photographs were. The document is also filled with phrases that I'm fairly confident have never appeared in an SEC filing before. Under the business strategy section right alongside standard disclosures about lease agreements and accounting standards management explains that their primary objective is to extend the light of consciousness to the stars. A phrase that appears 10 separate times in the filing which suggests that it wasn't a typo. Investors are also warned that we do not want humans to have the same fate as dinosaurs which is a fair point I suppose. It's the kind of sentence that gets you excited about what the risk disclosure section will look like. The document then goes on to outline a string of future business lines that read like science fiction. They include long-haul point-to-point terrestrial travel which I think means traveling around the earth in rockets rather than in airplanes, in-orbit manufacturing, yes in-orbit, passenger and cargo transportation to the moon and mars, manufacturing and energy production on the moon and mars, and asteroid mining because why mine for resources on earth when you can chase down an asteroid in the hope that you'll find useful minerals on it. The acronym AI appears over 200 times in the document. The word consciousness appears 10 times. The word profit appears somewhat less frequently than either of those. What we're looking at is quite possibly the most extraordinary document in the history of American securities regulation and today we're going to go through it because every single thing I'm about to tell you no matter how absurd it sounds comes directly from the filing. If you've been following SpaceX for the last two decades you probably think of it as a rocket company. In recent years with the rapid expansion of Starlink you might have updated that to a satellite internet company, but if you read the IPO prospectus you're in for a surprise. SpaceX is now apparently an AI company. According to the document 93% of the company's total addressable market is attributed to AI and based on the capital expenditure breakdown roughly 60% of all spending is now going into artificial intelligence infrastructure. The prospectus breaks down the business into three segments space connectivity and AI. In the first quarter of 2026 the space division the part that actually builds and launches rockets lost 662 million dollars. The connectivity division which is Starlink turned a 1.1 billion dollar profit. The AI division lost two and a half billion dollars in just the last three months. The only division that makes money is the satellite internet business. Everything else loses money. When Musk says that this is an AI company what he means is that the one business that actually works is subsidizing a money-losing AI venture while he tries to convince public market investors that the money-losing AI venture is the entire reason the company's worth 1.75 trillion dollars. If we look past the talk of extending consciousness to the stars and focus purely on the income statement the financial reality of SpaceX is bracing. Before we dig into that let me tell you about this week's video sponsor Salie. If you travel at all you'll know the dread of landing somewhere new and watching your phone bill explode with roaming charges before you've even grabbed your bag. Salie fixes that. It's an eSIM app that gives you affordable data across more than 200 destinations worldwide and here's the part I really like. You only install the eSIM once. That's it. One app, one install and every time you travel somewhere new you just pick a plan for that country and go. No swapping SIM cards, no hunting for a local provider, no installing anything again. With Salie you sort everything out before you leave home. Choose your destination, a plan that suits your needs and when you land your phone connects automatically to a local network. The plans are affordable and because you're on a local data plan rather than roaming there are no unexpected charges appearing on your bill afterwards. You can get a car, pull up maps or call ahead to the hotel the minute you step off the plane. Get an exclusive 15% discount on Salie data plans, download Salie app and use the code BOIL at checkout. In 2025 the company generated 18.7 billion dollars in revenue. Now 18.7 billion dollars is a lot of money but at a proposed valuation of 1.75 trillion dollars SpaceX is asking investors to value it at almost 100 times its revenue. If SpaceX were dropped into the S&P 500 today it would be the seventh largest company in but if you ranked it by actual revenue it wouldn't even meet 200. It would be down near Kellogg's the maker of Fruit Luke's breakfast cereal. You get the point. Unlike Kellogg's SpaceX is not profitable. Space exploration is just a tougher business than breakfast. Last year SpaceX posted a net loss of 4.94 billion dollars. What makes this number remarkable is that Starlink actually generated 4.4 billion dollars in operating profit. That means the rest of the business ate up more than nine billion dollars in a single year. Since its founding SpaceX has accumulated over 37 billion dollars in losses more than any other company that has ever gone public in history and there are no signs of the cash burn slowing down. Capital expenditure reached 20.7 billion dollars last year quintupling from 2023 driven by Starlink expansion, Starship development and AI infrastructure spending. To fund all of this the company is carrying 29 billion dollars in debt including a 20 billion dollar bridge loan taken out in March 2026 eight weeks ago. So when investors hand over 75 billion dollars in this IPO a meaningful portion of it may not be going to orbital data centers or a Mars colony. It goes straight back to the banks who lent SpaceX money eight weeks ago. Now to be fair the company is growing. Revenue is up somewhere between 33 and 43 percent annually which is genuinely impressive but that growth is coming entirely from Starlink not the AI business and even that growth comes with a caveat. Starlink's average revenue per user has fallen by around 18 percent since 2023 as the company is discounting aggressively to juice its subscriber numbers before the IPO. Back in April 2018 Gwynne Shotwell the president of SpaceX stood on a TED stage and made the promise within a decade she told the audience people would be taking 30-minute rocket trips from New York to Shanghai. These rockets would compete with long-haul airlines making up to 10 flights per day. That decade expires in under two years now which is not much time to figure out how to safely replace the with a reusable ballistic missile that requires passengers to withstand 3Gs at takeoff. Now if you were paying attention earlier you may remember the phrase long-haul point-to-point terrestrial travel from the prospectus. That is this product. It is still being pitched to investors as a future revenue stream. There's no sign of a commercial commuter In the list of yet to be realized business lines there's a section on payment processing. Twitter, Elon Musk's everything app, has been talking about becoming a financial services platform for several years now. They've secured money transmitter licenses in a handful of US states but they don't have a functioning payments product yet. So SpaceX is now partially in the business of filing paperwork with the Nevada Department of Business and Industry in pursuit of the dream of processing an $8 peer-to-peer payment on a rocket company's social media platform. SpaceX claims its total addressable market is $28.5 trillion. This is larger than the entire GDP of the United States and almost entirely built on businesses that do not yet exist. As the Financial Times Lex column noted the market has never before had to price a stock this speculative at this size which is probably worth keeping in mind. According to the prospectus enterprise applications of AI make up to 80 percent of SpaceX's total addressable market. This means they expect large businesses to pay for Musk's AI tools to improve productivity. If you add in consumer AI the total AI share of the claimed addressable market rises to 93 percent. So 93 percent of the company's value is Grok. Now I want to be careful here because 80 percent of a $28.5 trillion market is an enormous number so it's worth asking which enterprises are currently using Grok and from what I can tell the primary documented use cases for Grok are fact-checking tweets and generating non-consensual nude images that have resulted in regulatory investigations in Spain France and the UK and at least one ongoing lawsuit which is not exactly the enterprise productivity pitch that I was expecting. The filing effectively concedes that the enterprise AI market is dominated by OpenAI, Anthropic and Google. SpaceX's own AI product Grok holds a market share of roughly 3.4 percent. According to Bloomberg SpaceX's own engineers have been slow to adopt Grok for technical work because it underperforms rival tools. Last month Musk himself said that the AI code would need to be rebuilt from scratch shortly after he sold XAI to SpaceX for $250 billion. His solution to Grok's weakness in coding was to attempt to acquire Cursor, the tool his own engineers were actually using for $60 billion with a $10 billion break fee if the deal falls through. The company whose AI product represents 93% of its claimed addressable market has a flagship product its own engineers won't use and is spending $60 billion trying to buy a competitor so that they can get it to work. SpaceX's near-term AI revenue story rests substantially on a $15 billion a year deal to rent compute capacity to Anthropic, one of the very competitors whose existence proves that Grok is losing the AI race. So SpaceX is basically space core weave. If SpaceX were genuinely going to be a dominant AI company it would need that computing power that it owns for its own models. If Volkswagen were renting out all of its car factories would anyone describe Volkswagen as still being in the car business? The more pressing problem is that this $15 billion a contract, roughly 40% of projected near-term revenues, can be cancelled by Anthropic with 90 days notice. SpaceX's entire AI business model at the moment is renting GPUs to a competitor on terms that can vanish in a fiscal quarter. If SpaceX's total addressable market is $28.5 trillion and 93% of it is AI, then by SpaceX's own logic the leading AI companies must be worth vastly more than SpaceX. Anthropic's quarterly revenue is already roughly double SpaceX's entire AI segment revenue. Both Anthropic and OpenAI are reportedly filing for IPOs at approximately $1 trillion valuations and yet SpaceX wants $1.75 trillion on the basis of a market its direct competitors are winning. Now if you've been wondering exactly who is buying the Tesla Cybertruck, the SpaceX prospectus finally provides an answer. It turns out it was SpaceX. According to the filings SpaceX purchased $650 million in goods from Tesla last year. This included $131 million spent on Cybertrucks all at full retail price, no volume discount which is notable given how hard Tesla has found them to sell. That works out at roughly 1,500 vehicles. At one point in the fourth quarter of 2025, SpaceX single-handedly accounted for 18% of all Cybertruck registrations in the United States. Using shareholder money from one company that you control to support the sales figures of another company you control right before both companies face major financial events is generally considered not ideal corporate governance. There is also a small accounting discrepancy worth mentioning. SpaceX reports buying roughly $650 million of goods from Tesla last year and Tesla's own filings report selling $573 million of goods to SpaceX. So somewhere between Austin and Boca Chica $77 million seems to have fallen off the back of a truck, presumably a Cybertruck. But a few thousand overpriced pickup trucks are the least of the related party concerns in this document. Antonio Gracias is a long-term Musk ally and sitting member of the SpaceX board of directors. He also runs a private investment firm called Valor Equity Partners. According to the IPO prospectus SpaceX and XAI are carrying more than $20 billion dollars in AI infrastructure lease obligations tied to agreements with entities connected to Valor. Some of these deals are structured as what accountants call failed sale leasebacks. Normally in a sale leaseback a company sells an asset to an investor gets cash up front and leases the asset back removing it from the balance sheet. When the transaction fails to qualify as a genuine sale under accounting rules the asset stays on the books and the associated payment obligations get recorded as dead instead. The practical effect is that SpaceX is carrying billions in obligations to a firm run by one of own board members on its balance sheet as dead. It's once again considered good practice to board members who don't have $20 billion dollars worth of high-interest financial loans with the company they're supposed to be overseeing. Back in 2016 Elon Musk used Tesla shareholder money to acquire SolarCity, a struggling solar company that he also chaired and partly owned, to help justify the deal he staged a public demonstration of SolarCity's solar roof tiles during the acquisition negotiations. The tiles were later found by a Delaware court to have been actually inoperable and far from ready to go to market. At the time of the demonstration the court reviewed the entire transaction under its strictest standard of scrutiny, describing the process as deeply flawed, noted Musk's apparent inability to acknowledge his clear conflict of interest and then found the deal entirely fair anyway, largely because 85% of the shareholders had approved it and Tesla's stock subsequently went up. The judge declined to award Musk his legal costs, which is the Delaware Court of Chancery's version of a strongly worded ladder. Musk later had a falling out with Delaware over his Tesla pay package and reincorporated in Texas. He has now completed a structurally similar acquisition, this time of XAI, in a state with far more lax securities rules. In Texas, to bring a derivative lawsuit against SpaceX, a shareholder must own at least 3% of the company. At the current valuation that's approximately $52 billion worth of stock. To win any lawsuit, they must prove not just a breach of fiduciary duty, but specifically fraud, intentional misconduct or a knowing violation of law. A conflicted transaction, even one with no independent oversight whatsoever, does not meet that standard on its own. And if you wanted to go looking for the internal emails that might help you to prove fraud, as shareholders did so effectively in Delaware, Texas corporate law now explicitly excludes emails and text messages from shareholder document requests. When Tesla reincorporated in Texas, Governor Greg Abbott posted on Twitter to personally congratulate Musk and wish him well, which gives you a reasonable sense of regulatory environment. The lesson that Musk appears to have drawn from SolarCity is not don't do conflicted acquisitions, it's do them somewhere with friendly accords. The clearest beneficiaries of this acquisition are not the SpaceX engineers trying to get to Mars, they're the venture capitalists and banks, including Morgan Stanley, who were at first stuck holding billions in underwater debt from Musk's chaotic buyout of Twitter. Thanks to the XAI-SpaceX merger, those lenders have been made whole in SpaceX equity, conveniently timed just before the largest IPO in history. Historically, investment bankers won IPO mandates by demonstrating deep sector expertise, long-term advisory relationships and a willingness to work extremely long hours. It used to be quite a dignified business. The first sign of slipping standards in investment banking came in 2007, when the Goldman Sachs bankers who were pitching for the Lululemon IPO mandate turned up to the meeting, led by David Solomon, also known as DJD Sol, dressed head-to-toe in Lululemon at-leisure wear. I want to be clear here, this slip in standards may well have been the event that triggered the global financial crisis that year. DJD Sol, the bad boy of corporate finance, this time around, boasted to the press that he secured the lead left position on the largest IPO in history by having his staffers help him send Elon Musk a direct message on Twitter. Morgan Stanley, which had cultivated a Musk relationship for years through their StarTech banker Michael Grimes, is listed as co-lead. Their name appears second in alphabetical order, directly after Goldman Sachs. Morgan Stanley was apparently so furious about this that they forced SpaceX to explicitly clarify in the term sheet that the listing is purely alphabetical. Twenty-three banks have cramped their names onto the cover of this prospectus. The fees constitute the most lucrative Wall Street IPO payday ever. The only evidence of enterprise usage of Musk's grok AI may well be the millions of dollars of licenses that Musk is forcing on his lead IPO banks. All of this brings us to the corporate governance structure of SpaceX, which is perhaps the most heavily fortified dictatorship ever brought to US public markets. The company will have a dual-class share structure. Regular investors will get Class A shares, which carry one vote, and Elon Musk gets Class B shares, which carry 10 votes each. While Musk only owns around 41% of SpaceX, he will control more than 85% of the votes, meaning that he can't ever be fired by shareholders. The company has also placed limits on how shareholders can file legal challenges. As SpaceX writes in the prospectus, this will limit or preclude your ability to influence corporate matters and the election of our directors. On top of that, because Elon Musk convinced Nasdaq to change their index inclusion methodology in order to win this listing, SpaceX will be fast-tracked for inclusion in the Nasdaq 100 index. This is a massive deal. The Nasdaq 100 is tracked by over $600 billion of passive investor money. By fast-tracking SpaceX into the index, countless pension funds and passive investors will become forced buyers of the stock almost immediately, long before there's any serious price discovery. And they'll own shares in a heavily cash-burning company where they have no voting power and no meaningful ability to sue management. Musk has ensured that he will never lose his control over SpaceX. The filing reveals the creation of a new Class C non-voting stock. This exists so that SpaceX can acquire other companies in the future using that stock without ever diluting Musk's voting power. And if he ever decides to step down, he can place his super-voting shares into trusts, passing those super-voting shares onto his children, ensuring dynastic control. Finally, we get to his compensation package. You've most likely read about how Musk is getting $1 billion performance-based restricted shares and how these shares only vest when SpaceX establishes a permanent human colony on Mars and hits a $7.5 trillion market cap. SpaceX explicitly describes the achievement of these milestones in the prospectus as being improbable. To be clear, this is not a sudden burst of candor for management. It's instead a bit of an accounting trick. Under accounting rules, if the company admitted that it was probable that Musk would get these shares, they would have to expense the full value of the award, potentially hundreds of dollars, on their income statement today. By categorizing the share grant as improbable, it gets booked at zero cost. But there's a trick. As law professor Ann Lipton points out, Musk doesn't actually need to achieve any of those hard-to-reach goals. He gets the utility of these shares immediately. He can vote them today, he can collect dividends on them today, and with the approval of a board that he entirely controls, he can pledge them as collateral for loans to get access to tax-free cash today. He gets all the benefits of owning the shares immediately based on a Mars colony that the company admits he will probably never build. Now, possibly the most extraordinary line in the entire prospectus is this. SpaceX renounced certain corporate opportunities that may be presented to Mr. Musk and certain of our directors and their respective affiliates, and such persons may have no duty to present such opportunities to us. What this means is that nothing stops Elon Musk from setting up a separate private company tomorrow to pursue whatever the next big tech trend is, rather than doing it inside SpaceX, which if you remember him claiming Tesla was an AI company and then immediately starting XAI as a separate competing private entity, is a fairly relevant risk. As Ann Lipton summarized it, public shareholders in SpaceX will have no votes that matter, no ability to sell at a fair price discovered through normal market mechanisms, and no ability to sue the company for wrongdoing. No votes, no sales, no suits. There's one technology at SpaceX that everything else depends on. Not the AI, not the satellite internet, not the Mars colony. One rocket. Starship, the largest rocket ever built, is supposed to be the key to everything. Cheaper launches, bigger Starlink satellites, orbital data centers, a city on Mars, the NASA contracts. Without Starship, the entire $1.75 trillion story falls apart entirely. Yesterday, Barons wrote that the Starship launch was a bigger deal for SpaceX than the IPO filing itself. The latest version of the rocket was supposed to launch before the IPO filing, but that launch was postponed. It was then supposed to launch yesterday, the day after the filing. Nicki Minaj even turned up to watch, but there were technical difficulties. According to the news, they're going to try again today, so we'll have to see how that goes. The problem so far is that Starship hasn't yet worked. It's still in the rapid, unscheduled disassembly phase of its development. It has yet to carry any cargo to orbit other than a banana, so as Barons rightly states, this launch is really going to matter. The entire investment thesis is built around Starship achieving what SpaceX themselves call an insane flight rate. Hundreds of launches per year, each carrying 200 tons into orbit. Starlink version 3 satellites, which are supposed to provide 20 times the capacity of current models, are too large for the existing rockets and require Starship. The orbital data center concept requires Starship to launch a million satellites. The Mars colony requires Starship to work reliably enough to transport a million people. If Starship fails to deliver, if the flight rate is half of what is promised, if the reliability is lower, and if the costs are higher, the entire valuation collapses. The 1.75 trillion dollar number assumes Starship works exactly as advertised on schedule with no technical setbacks. History suggests that rockets rarely work exactly as advertised, so the company claiming to be worth 1.75 trillion dollars is depending on a rocket that is yet to to land without exploding, which is a risk. Now IPO prospectuses are required to tell investors specifically what the company will do with their money. This is called the use of proceeds. A piece by Cape Fear Advisors points out how hard you have to dig, including through the footnotes, to grasp the full picture of SpaceX's use of proceeds. The IPO is expected to raise between 50 and 75 billion dollars. When you add up all of the commitments buried in the document, the company needs approximately 235 billion dollars over the next few years, between three and five times the IPO proceeds. What this means is that the IPO is not the end of fundraising, it's just the beginning. Matt Levine summed up how investors should think about this vibes-based investment in his Money Stuff newsletter. He writes, if you're buying SpaceX stock to tell Elon Musk what to do, you should stop. If you're buying SpaceX stock because you want exposure to the space AI business but you have your doubts about current management, you should stop. If you're buying SpaceX stock because you like Elon Musk and want to go along for the ride with him, yes, that's correct. That's the investment thesis here. If later you're disillusioned with Elon Musk, if you feel that you were misled that he didn't do the stuff he promised to do, well, that's kind of his whole thing. If you found this video interesting, you should watch this video on private credit next. Don't forget to check out our sponsor Saley using the link in the video description and see you in the next video. Bye.