SpaceX Raised $111B — It Already Needs More

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Ed Elson (1:52)

Welcome to Prof G Markets. I'm Ed Elson. It is October 8th. Let's check in on yesterday's market vitals.

The major indices fell from record highs as bonds sold off again. The yield on 10-year treasuries hit a new 24-year high. It later cooled off following a 10-year note auction that drew solid demand. Meanwhile, minutes from the latest Fed meeting showed another rate hike is likely this year, though it may not come until December. And finally, Brent crude remained elevated around $101 per barrel.

OK, what else is happening? Four months ago, SpaceX raised $86 billion from its IPO. Now it's looking to borrow even more. On Tuesday, the Financial Times reported that SpaceX is seeking $40 billion to buy Nvidia chips. $30 billion will come from investment-grade bonds, and the other $10 billion will come from bank loans. Reportedly, the investors pitched on this deal got a two-page memo, which showed pictures of outer space with an arrow pointing to data centers, quote, somewhere in the universe. This is not the first time that SpaceX has borrowed big. Less than two weeks after its IPO, SpaceX sold $25 billion worth of bonds to investors, which now trade at 85 cents on the dollar. Still, the stock has been on a tear this month. SpaceX shares are up about 12% over the past week. Yesterday, the stock closed down 2%.

Okay, here to break it down, speaking with John Foley, head of the Lex Column at the Financial Times. John, thank you for joining us on Prof G Markets. So SpaceX wants to borrow $40 billion.

Kind of crazy considering they raised $86 billion just four months ago. Then right after that, they issued another $25 billion worth of debt. And now they're saying, that's not enough. Now we need more. Now we need $40 billion. Let's just start with your initial reactions.

John Foley (3:55)

Well, SpaceX already has quite a bit of cash on its balance sheet because it did this IPO. It raised debt shortly afterwards. It has something like $90 billion. But what Elon Musk wants to do is build, he says, 10 gigawatts worth of data centers by the end of next year. Because we measure these things in gigawatts. And a gigawatt costs very rough numbers, about $50 billion to build. So that would be $500 billion.

So unsurprisingly, he needs more money with which to do that. So it's not totally surprising that he's now coming to the market and saying, can I have some more money? He absolutely needs that and much more if he's going to meet his goals of data centers on Earth, in space, or anywhere else in the universe.

Ed Elson (4:32)

So $500 billion, I heard that correctly, right? That's how much he would need to raise in order to achieve those goals?

John Foley (4:41)

Yeah, that's like taking a very rough $50 billion for a gigawatt worth of data center and his plan to build 10 gigawatts by the end of next year.

Ed Elson (4:49)

I guess the question, and this seems to be reflected right now in the bond markets right now, especially the credit default swaps markets, which is like, where is the money going to come from? This is something that we had been talking about when they first went public, which is that in order to keep up with their extraordinary costs, they're going to have to raise huge amounts of money. We're already starting to see signs of it. They raise the IPO money, then they go and issue the debt. Now they want to issue more debt.