SpaceX Bankers Kick Off Marketing for Debut High-Grade Bond Sale

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**SPEAKER_2** (0:08)
You're listening to Bloomberg Businessweek with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Tim Stenovec** (0:14)
We got Robert Schiffman with us, Bloomberg Intelligence Senior Technology Credit Analyst. He joins us here in the Bloomberg Interactive Brokers Studio.
Okay, I'm going to ask the simple question here, which is SpaceX just raised roughly $86 billion in this IPO. Why are they selling billions of dollars of bonds right now?

**Robert Schiffman** (0:33)
Well, they need money. Though they said this morning that they had $100 billion of cash, they're going to be spending a lot more over the next few years than they make.
Probably in the neighborhood of $30 to $40 billion of negative free cash flow for the next few years. On top of that, they have a $20 billion term loan due next September. They're going to use the proceeds from this bond deal to pay off. So they're just getting ahead of the curve like everybody else. Why are the Alphabets and Amazons and Metas raising so much? It's because over the next few years, they're going to be spending a lot more.

**Carol Massar** (1:07)
And because they can.

**Robert Schiffman** (1:08)
And because they can.

**Carol Massar** (1:09)
I mean, the market's receptive, right? Investors are interested.

**Robert Schiffman** (1:11)
Well, not only that, the rating agencies have just teed them up for an enormous inaugural launch. I mean, giving them BAA1, BBB, BBB-plus ratings basically tells the bond market, you don't have to worry about junk ratings. You don't have to worry about liquidity. Just go run your business over the next three or four years, and you're going to grow into these ratings. If you just looked at this balance sheet, you wouldn't say it looked anything like a solid, stable investment grade name. But in fact, they told them they are.

**Carol Massar** (1:40)
Okay, just because I'm going to be sarcastic here. So we don't have to worry about anything. It's not like the ratings agencies ever get anything wrong.

**Tim Stenovec** (1:47)
It's like your favorite thing. Because think about 2008, like you bring us back there.

**Carol Massar** (1:52)
So can we say it's the same situation?

**Robert Schiffman** (1:56)
Yeah, I'd say if you were concerned, you should simmer down. That this is going to be a business that has access to tremendous amounts of capital because they should. It's sort of like, I just think that Elon Musk is to this generation that Warren Buffett was to the last. Like you put your full faith and trust in Elon. You're shaking your head. I'm shaking my head because one is creating value.

**Tim Stenovec** (2:22)
They're polar opposites when it comes to balance sheets.

**SPEAKER_2** (2:24)
Oh, sure.

**Robert Schiffman** (2:24)
Listen, the strategies are different, but value creation is what's the same. And what people are looking now, they're looking at the future of AI. And nobody, I think, can see the future more than Elon Musk sees it.

**Tim Stenovec** (2:36)
Well, we had a great... I'm just going to bring people into this. We had a great chat. You know where I'm going. We were in Las Vegas at an event on Thursday. And this, unfortunately, this wasn't even on mic. We were just continuing the conversation. Well...

**Carol Massar** (2:49)
Or maybe not attribute it to who?

**Tim Stenovec** (2:51)
We were talking to an executive who has experience in the space. And he was like, I wish I were 20 years younger to just see what is coming, not just from SpaceX, but from the other firms that are working on this stuff. Like, that is how cool of a moment we're in right now.

**Carol Massar** (3:07)
Like, he was upset that he was going to miss it, right?

**Tim Stenovec** (3:10)
Yeah.

**Robert Schiffman** (3:10)
Well, good for you. I don't travel to Las Vegas. I'm here reading S1s and 10Ks working on spreadsheets and mob.

**Tim Stenovec** (3:18)
You don't need to be here to read those.

**Carol Massar** (3:19)
No, but it was a great deep dive into the AI world in a different way for us. And because we are really trying to understand all the twists and turns of it, because I think it's very easy to look at it in a very broad macro simplistic level.

**Robert Schiffman** (3:33)
Yeah.

**Carol Massar** (3:33)
But there's a lot of stuff going on underneath.

**Robert Schiffman** (3:35)
I think right now, you know, people are sort of wondering what AI really is. Like, it's for most, it's just a chat bot. It's like, I've got a cough, you know, how much, what drug should I take? And I just don't think that's it. Other people are looking for this to be, you know, 10 years out the future and why we're not flying around in jets and spacecrafts and hoverboard. So it's someplace in the middle is that these networks right now are being built, right? I like to say, like, when you talk about this baseball analogy, or like being the bottom of the third, we are just warming up. We haven't even started the ball game yet. So data centers are being built. There's tens, hundreds of billions of dollars are being put in. What you're starting to see, though, are enterprise customers actually writing checks. You saw that in the first quarter. That's why you saw stocks explode in a good way, not when you talk about SpaceX. You don't like using terms like that. But you saw them explode higher because confidence that AI was starting to be monetized is coming, and we're just starting to see flavors of that. That's going to flow through cash flows, but it's probably not going to flow through into an inflection point in 2028 So you're going to see a lot more borrowing until then. But then once we're going to get to 2028, you guys are going to have me on, and you're going to say, why are these companies buying back so much stock? And I want to say because they have so much cash, they don't know what to do with it.