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SpaceX

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Revolutionizing space transportation and making life multi-planetary

~$150bn

Offering valuation

~$150bn

Last valuation

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Closing on 17 September

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Highlights

Large, fast growing markets. The space launch services market is expected to reach $32B by 2027 (Allied Research), the satellite internet market has a $1trn TAM (with $120B in annual revenue projected for Starlink), and deep space exploration market expected to reach $700B by 2030 (Morgan Stanley Research).

Building a monopoly. As Packy McCormick of Not Boring explains: "SpaceX is able to build bigger and bigger rockets, and fill them with revenue-generating cargo, because Starlink is able to sell into the practically bottomless market for communications. Starlink is able to launch so many satellites because of the cheap launches provided by SpaceX’s bigger and bigger rockets. Together, they’re spinning a flywheel that makes it exceedingly difficult for any launch or satellite company to catch up."

Profitable in core segments. SpaceX President Gwynne Shotwell has confirmed SpaceX’s main launch business is already profitable and that its newer Starlink business recorded its first quarter of positive cash flow in 2022 and is on track to turn a profit this year.

Extensive portfolio of groundbreaking projects. SpaceX achieved several historic firsts, such as launching, orbiting, recovering, and reusing the same rocket. It also carries NASA astronauts to the ISS, offers space tourism, and deploys communication satellites into orbit. Moreover, SpaceX aims to transport individuals to Mars in the future.

Significant potential upside and exit. SpaceX expects to spin off Starlink off as a separate company and take it public once cash flow can be predicted. Institutional investors and industry experts polled by Morgan Stanley expect SpaceX to become more valuable than Tesla. Tesla was worth $1.2T in 2022.

Starship and Starlink projects met with early success. Starlink presents a substantial opportunity in the coming years. To date, Starlink has launched 3,600 satellites into orbit. The system is now active on all continents, having reached over 1,000,000 active users. At around $100 a month, Starlink is generating $2.4B in annual recurring revenue. The company plans to reach 100 million users in the next 5–10 years. With $1,200 in annual sales per user, Starlink could generate $120B in sales for SpaceX.

Deal terms

Share price

Instrument

Implied valuation

Last valuation**

Discount

Fees

Carried interest

2023 revenue (estimate)

Revenue growth rate (estimate)

Forward multiple

$83.43

Common shares

$150bn

~$150bn

5% (one off)

15%

$11.6bn

250%

12.9x

Company

SpaceX was founded in 2002 by Elon Musk to revolutionize space transportation offering reusable rockets with the ultimate goal of making life multiplanetary. The company designs, manufactures and launches the most up-to-date rockets and spacecrafts. With its Starlink business, SpaceX also aspires to become the leading and first satellite service provider delivering high-speed Internet to users from all around the world.

SpaceX is headquartered in Hawthorne, CA and has launch operations in Florida and Texas. Since its inception, SpaceX has since raised over $10.5B in funding from investors like Founders Fund, NASA, Seqouia, a16z and Manhattan Ventures.

Market size

Morgan Stanley estimates that the ~$360B Global Space Industry will grow into a $1.0T+ Global Space Economy by 2040. Along with significant execution risk, MS estimates a wide range of potential outcomes, from ~$600B (-100 bps v. Global GDP) to ~$1.7T (+400 bps v. Global GDP).

Whilst SpaceX is the leader in the space launch services market, which is expected to reach $32B by 2027, its Starlink business is designed to service many verticals in the larger satellite internet market, which is estimated to have a $1T total addressable market.

A table with Starlink's total addressable market

MS estimates a $400B+ incremental revenue opportunity from providing internet access to unserved & underserved parts of the world.

Products

SpaceX conducts its operations through four primary segments, with its Launch and Starlink programs being the most advanced. The company also invests considerable resources in the research of hypersonic travel and Mars exploration, which are part of its Starship program.

1. Launch

SpaceX has surpassed their launch record for the last two years in a row. In 2022, the company successfully completed 69 launches, more than doubling its 2021 figure of 31. In 2020, SpaceX set a record of 26 fulfilled launches.

Each rocket launched into orbit contains a payload, typically either satellites, cargo, astronauts, or a space probe. The company contracts with government or private enterprises to bring payloads into space. The resusability of components means SpaceX reduced launch costs by a factor of over 25x compared to programs like NASA’s Space Shuttle.

Revenue per launch is estimated from $40M to $150M depending on the contract, with a total estimate of $2.4B for 2022. (Note: 34 launches were for Starlink, which do not generate revenue).

SpaceX rocket costs versus other rockets

2. Starlink

High-speed, low latency broadband service accessible everywhere on Earth. SpaceX started launching Starlink satellites in 2019. It now has more than 3,600 Starlink satellites in low Earth orbit (LEO), a constellation far larger than any other satellite system today. In total, nearly 12,000 satellites are planned to be deployed, with a possible later extension to 42,000.

Starlink has hit hypergrowth, 10x'ing paid subscribers in just 16 months. The service was launched in October 2020. In May 2023, SpaceX announced that Starlink has over 1.5M subscribers, up from 1M in December 2022, 250,000 in March 2022 and 150,000 in December 2021. Starlink also continues to expand its coverage globally with service now available in more than 30 countries.

User experience comparable to cable internet.

30Mbps to 3Gbps download speed
<30ms latency (20x better than competitors)

In December 2020, Starlink received $885.5 million award, distributed over ten years, from FCC to provide broadband to over 640,000 rural homes and businesses in 35 U.S. States.

Starlink is estimated to generate $1.9B in 2022, of which $1.1B is recurring revenue and $0.8B one off revenue.

3. Starship

Starship is a massive, fully reusable launch vehicle with a significantly higher payload capacity. It could enable Earth-to-Earth long-distance trips in under 30 minutes, facilitate Starlink satellite deployments and transport cargo and people on missions to the Moon and Mars. In May 2021, a Starship prototype successfully completed a high-altitude test flight from South Texas. The next phase of testing involves achieving orbit, subject to regulatory approval for SpaceX's next launch. The initial launch price for Starship is expected to be between $150-250 million per launch.

There is a significant revenue opportunity for SpaceX in an existing market:

In 2019, there were 530,000 annual long-haul flights (10+ hours)
carrying an average of 310 passengers per flight,
resulting in approximately 165 million seats annually,
of which a 5% market share of 8.25 million seats at an average ticket price of $2,000 would translate to $16.5 billion in annual revenue for SpaceX.

Starship estimated travel time to major cities

4. Mars Exploration

In an interview on December 28th 2021, Elon Musk doubled down on his predictions for human travel to Mars. Based on current progress, Elon gave a timeline of between 5 to 10 years before SpaceX could put a human being on Mars.

5. Space Tourism

In 2023, SpaceX is planning on sending the first civilian mission around the Moon. Market sizing estimates have hypothesized Space Tourism can be worth between $3B and $8B in 2030.

In September 2021, SpaceX launched Inspiration4, the first all-civilian mission to Space on a 3-day mission that successfully reached the Earth's orbit at an altitude higher than the International Space Station.

Competitive landscape

Advantages:

SpaceX is the first and only company to master hypersonic retro-propulsion to land and re-use first-stage rockets.
The company also has a significant edge in engine manufacturing cost due to the mass manufacturing of engines, enabling a boom in satellite launches.
Vertical integration of Launch and Starlink businesses yield economies of scale in terms of satellite launch services. Over time, other satellite web companies will not be able to sustain competition on a cost basis.

Competitors:

Blue Origin is an American privately funded aerospace manufacturer and sub-orbital spaceflight services company founded by Jeff Bezos.
Virgin Galactic is an American spaceflight company founded by Richard Branson. The company completed a 15-minute space flight in July this year.
United Launch Alliance is a Boeing-Lockheed joint venture providing launch services for government and commercial customers.
Rocket Lab provides access to space for civil, defence, and commercial markets through its Electron launch vehicle.

Financials

The company's last reported revenue of $2B was in 2019, and the company does not disclose any financial information.

In 2022 SpaceX completed 69 launches, of which 35 were for customers. It is estimated that the company generates $40M to $150M per launch, depending on the contract. Launch is estimated to have generated $2.4B in 2022. SpaceX President Gwynne Shotwell has said that this business is already profitable, with the cashflow from those operations paying for the company’s development.

In Dec 2022, SpaceX announced Starlink has more than 1M active users, an almost 7x increase from 145,000 in Dec 2021. Starlink internet costs $110 to $135 per month with a $599 one-time equipment fee or $500 per month for a business subscription. Starlink is estimated to generate $1.1B of annual recurring revenue, in addition to $0.8B of equipment fee revenue.

Starlink recorded its first quarter of positive cash flow in 2022 and is on track to turn a profit in 2023.

In February 2023, PayLoad estimated SpaceX’s 2022 revenue to be $4.6B and 2023 forecast revenue to be $11.6B. PayLoad revised up their 2022 estimate by 40%, primarily due to Starlink’s increase in subscribers (announced by SpaceX).

Industry estimates of SpaceX's revenue are as follows:

Exit Timeline

In 2013, Elon sent an email to SpaceX employees describing why he wanted to keep the company private.
In November 2021, Elon tweeted "A lot has happened in 8 years"; said SpaceX will spin Starlink off as a separate company and take it public when its satellite internet business proves financially viable. “Once we can predict cash flow reasonably well, Starlink will IPO,” he tweeted in February 2021.
This echoes comments from President Gwynne Shotwell that Starlink could be spun off from SpaceX for a separate IPO.

Investment Rounds

In January 2023 SpaceX was reported to be raising a $750M investment round from a16z, Sequoia and other marquee investors at a $137B valuation, at a price of $77 per share. The company has raised a total of $10B.

In June 2023, SpaceX announced it was valued at almost $150B in a tender offer.