On Paper, the SpaceX IPO is Not So Heavenly

**Ray Rike** (0:08)
Welcome to the AI to ROI, the Big Story Podcast. I'm Ray Rike, your host or co-host, the CEO of Benchmarkit, and joining me in Zoys is my co-host, Peter Buchanan, Magic Partner of Newplan.
Peter, we're covering the SpaceX IPO today, and I want to lead with a spoiler.

**Peter Buchanan** (0:29)
Well, just go for it. Just eliminate the suspense.

**Ray Rike** (0:32)
Well, SpaceX's launch business is genuinely great. It's heavenly.
Starlink is really great. And the IPO, as currently structured, not so great. So, hey, we're not here to give investment advice. That's not what our show does or our background. We're here to present data and facts about what's going on in the AI and AI adjacent industries and tell you what it actually says.

**Peter Buchanan** (1:03)
That's exactly right. And so SpaceX, they filed for a confidential IPO registration with the SEC on April 1st. And the public S1 is expected at the end of the month or beginning of May with a Nasdaq listing targeting early June. And it would be the largest IPO in history by a factor of 2.5x.
So that at a valuation of $1.75 trillion, they're raising $75 billion at a valuation of $1.75 trillion. There's never been an IPO this big.

**Ray Rike** (1:43)
Well, the next closest one actually was Aramco, right? The Saudi oil company, and it raised $25 billion. I still remember that.

**Peter Buchanan** (1:51)
Yes, at a 4x valuation.

**Ray Rike** (1:54)
Exactly.
Okay. Well, let's give you some of the inside baseball details. So first, SpaceX merged with XAI in February of this year. And what it really did was it took a high cash burn, some people might call it a bleeding AI business, based upon two operations because you had XAI and you had X. And investors are now being asked to pay almost 95 times 20-25 revenue for that combined entity.

**Peter Buchanan** (2:27)
Right. And so today we're going to walk through the business piece by piece. That's Launch Services, Starlink, XAI, X. We're going to talk about the IPO mechanics, and we're going to talk about the post IPO structure and what it actually looks like because there's some changes to the rules for this IPO.
So let's start with what works.

**Ray Rike** (2:51)
Well, let's start with Launch Services then, because it's the real, I'll call it a monopoly. And by the way, it's also really cool. High candy. When you see those rockets blasting off or, my gosh, them coming back down and being caught, right, on the way down, it's pretty amazing. And, you know, so.

**Peter Buchanan** (3:08)
You know, the son of a friend of ours, Ray, actually designed the nose cone of that rocket.

**Ray Rike** (3:13)
I do. My former GE connection, I believe.

**Peter Buchanan** (3:16)
Yeah, that's right. Yeah.

**Ray Rike** (3:17)
Well, so Launch Services is a part of SpaceX that everyone actually respects and pretty amazed by it. Right. And those Falcon launch costs, like a Falcon 9 launch costs, about $67 million.
And if you compare it to the competition, like the United Launch Alliance, it runs 110, 160 million. So it's very efficient for a rocket launch service. And by the way, there's no other meaningful competitor at scale. And we heard about Jeff Bezos and Blue Origins, New Glenn, right? And they just launched commercial for the first time last year. You got Rocket Labs, Neutron, and right? They suffered a tank failure earlier this year and won't fly at least until Q4 at the earliest of this year.
So they are far ahead of the competition. They hold about $4 billion in NASA contracts. And they just won a almost 180 million Space Force contract in April. So they are the 800 pound gorilla and Rocket Launch Services.

**Peter Buchanan** (4:20)
They are and that price advantage alone is really extraordinary. I mean, it's a 40 to 60 percent cheaper for an incredibly reliable service. I mean, they do well over 100 launches a year. So that's a reliability record that no one's going to match for the foreseeable future. So what's the catch?

**Ray Rike** (4:42)
Well, one of the things I actually love about Elon Musk is he's truly a visionary and he communicates as a optimistic visionary entrepreneur. So Starship, which is their next generation rocket, it was initially supposed to enter commercial service in 2021 Now it's five years later and it's completed 11 test flights and the next launch is scheduled for mid-May with a new version, their V3.
So one of the things I would say is sometimes Elon's a little bit more optimistic than physics and reality can actually support. And even their own internal documents put their first orbital refueling. So be able to refuel in space in June, 2026