NEW YORK TIMES: Is SpaceX worth $1.77 trillion? It’s a pie in the sky, some investors say

In a pitch to private investors, Elon Musk once predicted that one of his companies would quintuple its revenue to more than $US26 billion and quintuple its customer base by 2028.

That company was Twitter and those projections were made as Musk prepared to buy the social media company for $US44 billion in 2022.

Today, Twitter, which has been renamed X, has fallen far short of what Mr Musk said would happen. The social media platform’s ad revenue plunged 65 per cent last year. And it was ultimately folded into SpaceX, Mr Musk’s rocket company, this year.

Now as SpaceX readies for a blockbuster initial public offering, Mr Musk and his investment bankers are selling even loftier propositions about what the rocket and artificial intelligence company will achieve. But those proclamations, coupled with Mr Musk’s history of over-promising, have some investors increasingly worried that SpaceX — which priced its offering at a $US1.77 trillion valuation and is set to begin trading on Friday — may burn them.

“It really does feel very much a ‘don’t look at the man behind the curtain’ situation,” said Mr Chanos, the founder of the investment firm Chanos and Co., who predicted the 2001 collapse of Enron, the energy company that was found to have engaged in accounting fraud.

Mr Chanos and others said they were concerned with SpaceX’s finances. The company lost $US4.3 billion in the first three months of the year alone and is spending heavily on AI development. Revenue was $US4.7 billion and growing, but it was far lower than that of tech giants like Meta, which brought in $US56.3 billion in the same period and has a stock market valuation of $US1.4 trillion.

At the same time, SpaceX has promised that its total addressable market — which is its revenue opportunity if it captured all the demand across its various industries — is the largest “in human history” at $US28.5 trillion. The figure, which depends on SpaceX proving that it can put AI data centres in space and develop factories on the moon, dwarfs China’s annual gross domestic product by more than $US8 trillion.

Michael Burry, a hedge fund investor featured in the book “The Big Short” for his predictions on the 2008 financial crisis, said in a Substack discussion last month that any increase in SpaceX’s stock after its IPO would “be on hype and technicals.”

“Nothing in that S-1 suggests it is worth $US1 trillion let alone $US2 trillion,” Burry wrote, referring to the company’s IPO filing.

Even some SpaceX shareholders have doubts. Ross Gerber, the CEO of Gerber Kawasaki, an investment firm that owns SpaceX stock, said the company’s projections reminded him of unverified information that young start-ups used to woo investors. He said he was alarmed by SpaceX’s valuation of $US1.77 trillion, which would be more than four times the $US400 billion that the company was valued at just 13 months ago.

“Investors are paying an extremely high price for this stock,” Mr erber said.

A SpaceX spokesperson did not return a request for comment.

SpaceX’s bankers, including Goldman Sachs, which is leading the IPO process, have added to the sweeping projections. The Financial Times earlier reported that Goldman had told a potential investor that it expected SpaceX’s total revenue to reach $US474 billion in 2030, up from $US18.7 billion last year.

Morgan Stanley, which is also working on the IPO, said in an analysis shared with investors that it anticipated SpaceX’s revenue would hit $US3.4 trillion by 2040, according to The Wall Street Journal.

Goldman Sachs and Morgan Stanley declined to comment.

Morningstar, an investment research company, issued a more sober analysis. The firm said that SpaceX’s IPO price was “overvalued” and that the company was worth around $US780 billion. Nicolas Owens, a Morningstar equity researcher, gave SpaceX a 7 per cent chance of getting its latest rocket, Starship, to a point where it can be used over and over again like a regular plane, and proving that AI data centres were cheaper and more effective than their terrestrial counterparts. In the most optimistic scenario, Mr Owens said, SpaceX could be valued at $US1.97 trillion.

“We’ll know in two to three years if Starship is reusable or a GPU rack in space will be viable or offer some cost savings,” he said, referring to the computer chips used to power AI technology.

“But the company is asking everyone to decide on Friday if that’s possible and what it’s worth.”

Mr Musk has also shown a propensity to change his business goals on the fly, analysts and investors said. It was not until last year that he first spoke of data centres in space, and he doubled down on the idea in February after merging SpaceX with his AI company, xAI.

In April, SpaceX said it had agreed to acquire Cursor, an AI start-up that develops coding software, for $US60 billion, shifting the company into an area it was not previously focused on. Mr Musk, who has spent billions to build his own frontier AI models and his AI chatbot Grok, also appeared to change course recently on other AI plans.

Last month, SpaceX struck a deal with AI start-up Anthropic to provide it with computing power for products that were not being used by Mr Musk’s own AI services. SpaceX then forged a similar agreement last week to provide Google with computing power.

SpaceX boosters on Wall Street and social media promoted the deals as wins that would generate tens of billions of dollars in revenue. But naysayers pointed to how the company was making significant changes to its long-term business plans at the last minute.

“The real excitement should be about developing some new, powerful agentic model,” Mr Chanos said. “But xAI seems to be suddenly changing its business model from developing models like Grok to basically becoming a neocloud,” he said, using the industry term for companies that provide computing power to other AI firms.

“That’s crucial because the entire valuation rests on xAI’s progress,” Mr Chanos said, calling the neocloud strategy a “commodity business” that is valued far lower on the public markets.

Ultimately, SpaceX’s IPO will be a litmus test of investors’ faith in MrMusk, Mr Gerber said. Those willing to pay will do so because Musk, who previously transformed the car industry with his electric carmaker Tesla, is at the helm of a one-of-a-kind company in SpaceX.

“People are paying a trillion dollars for Elon,” Mr Gerber said.

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