SpaceX is reportedly expected to launch its IPO on June 12 and trade under the ticker symbol SPCX. This will allow regular retail investors to buy shares of the company for the first time. The company hopes to raise about $75 billion through the IPO.
If SpaceX raises the amount, it would become the largest IPO in history.
The current IPO fundraising record belongs to Saudi Aramco, which raised $29.4 billion in 2019. SpaceX is expected to have a market valuation of around $1.8 trillion after the IPO. At that valuation, the Elon Musk-led company would rank among the world’s 10 most valuable firms and could even surpass Tesla in market capitalization.
SpaceX valuation growth
According to a report by The Motley Fool, many investors still view SpaceX mainly as a rocket company, but Starlink has emerged as its most important business financially.
SpaceX reportedly generated about $18.7 billion in total revenue last year, with Starlink contributing roughly $11.4 billion of that amount. The satellite internet business also earned around $1.2 billion in profit, making it the company’s primary profitable division.
The report noted that Starlink’s revenue grew nearly 50% over the past year, one of the major reasons behind growing investor excitement around the possible IPO.
Also Read: SpaceX IPO reveals hidden reality of passive investing and index funds
SpaceX’s launch business generated an estimated $4.1 billion in revenue last year. However, despite its dominance in the space launch industry, the division reportedly posted losses of around $657 million, according to The Motley Fool.
SpaceX has also expanded into artificial intelligence through xAI.
SpaceX AI business
xAI is Elon Musk’s AI company and competes with firms such as OpenAI and Anthropic. xAI is currently behind its major competitors in AI technology, market share and financial performance.
Its core business generated about $1.4 billion in sales last year, excluding advertising revenue from X.
At the same time, xAI is reportedly spending around $1 billion every month. This large cash burn is a major concern for investors, The Motley Fool noted.
A recent deal involving Anthropic could improve xAI’s business outlook. However, it is unclear how much that deal will help in the long run. The report created three possible scenarios to show what a $5,000 SpaceX investment could be worth after five years.
Also Read: OpenAI files for US IPO: When could the ChatGPT maker enter the market? All we know so far
What a $5,000 investment could look like in each case
1. Bull case SpaceX stock
In the most optimistic scenario, Starlink continues growing very quickly while maintaining strong profits. The launch business becomes more profitable and continues leading the market. The optimistic scenario also assumes xAI reduces its losses and gains more customers and wider adoption.
Under this best-case scenario, SpaceX stock could deliver an average annual return of 15%. A $5,000 investment would grow to approximately $8,745 after five years in this scenario.
SpaceX’s total valuation could reach about $3.6 trillion by 2031 in the bullish scenario.
2. Base case investment return
The Motley Fool’s middle scenario assumes Starlink continues growing but at a slower pace. This scenario also assumes competition in the launch business becomes stronger. The launch division remains the industry leader but struggles to achieve strong and consistent profitability.
In the base-case scenario, the stock generates an average annual return of 7%. A $5,000 investment would grow to around $6,554 after five years in this scenario.
SpaceX’s valuation would rise to approximately $2.5 trillion by 2031 under the base case.
3. Bear case SpaceX outlook
In the pessimistic scenario, Starlink’s growth slows significantly. Profit margins also become weaker in the pessimistic case. Competitors gain ground against SpaceX in the launch business. The pessimistic scenario assumes xAI continues losing large amounts of money without a clear path to profitability.
Under this bear-case scenario, the stock would lose about 15% per year.
A $5,000 investment would shrink to roughly $2,638 after five years, according to the report. SpaceX’s valuation could fall to around $950 billion by 2031 in this scenario.
After reviewing all three scenarios, the report stated that the bear case appears more realistic than the bull case. The report noted that SpaceX’s expected valuation is extremely high and leaves little room for mistakes. Based on the estimates, a $5,000 investment could be worth anywhere from $2,638 to $8,745 after five years, depending on how SpaceX, Starlink and xAI perform.