Investing in Space

Elon Musk’s sudden plan to take Tesla private complicates any possible SpaceX IPO

Key Points
  • SpaceX has a private value of about $28 billion.
  • A report in The Wall Street Journal says CEO Elon Musk believes his entrepreneurial values are incompatible with the idea of being held publicly accountable to shareholders.
  • Gwynne Shotwell, the space company's president and COO, told CNBC in May that any IPO plans were far off in the future and will not be considered until SpaceX is running regular flights to Mars.
How Musk taking Tesla private complicates future SpaceX IPO
Taking Tesla private complicates future SpaceX IPO

The plan to take Tesla private raises questions about the future for CEO Elon Musk's other big project, SpaceX.

While the rocket builder was never expected to list shares on the stock market any time soon, Musk's distaste for public markets was made clear this week: Musk told Tesla employees and the world on Tuesday that he wants to take the electric vehicle maker private due to volatility of the quarterly earnings cycle and being the target of investors betting against the company.

Following Musk's announcement, The Wall Street Journal reported he had taken even the long-term possibility for a SpaceX IPO off the table. The report, citing people close to Musk, said those long-term plans have now been discarded because his time with Tesla on the public markets soured his view of a SpaceX IPO.

SpaceX President and COO Gwynne Shotwell told CNBC in May that the company "can't go public until we're flying regularly to Mars."

"One way or another, it's not until then, at a minimum," she said.

@CNBC: SpaceX Gwynne Shotwell on public offering plans

A person familiar with the matter told CNBC on Wednesday that thinking has not changed. That puts an IPO years, if not over a decade, away. In his letter to Tesla employees, Musk called SpaceX "a perfect example" of the need for a company to enter "a phase of slower, more predictable growth" before turning "to the public markets."

SpaceX aims to sends it first cargo mission to the red planet by 2022, with the first humans following in a mission in 2024. A key part of Musk's plan to colonize Mars is consistent, safe transportation to and from the planet. Its most recently launched rocket, the Falcon 9 Block 5, is "designed like a commercial airliner," Musk said in May.

"SpaceX's ultimate goal is to get humans to Mars. This goal has shaped almost everything the company has done," Sam Korus, ARK Invest analyst, told CNBC. "Given the long-term horizon and the inherently risky nature of the mission, Musk believes the company should remain private until the goal of life on Mars is achieved."

Shotwell said in May that SpaceX is profitable despite "financially rough years," such as when one of its Falcon 9 rockets exploded in 2016. Each rocket launch may bring in millions of dollars but the risk of a failure still makes the business highly volatile.

Successes have come steadily for SpaceX this year: The company is on track to double its number of annual launches and possibly launch more rockets than any other country in 2018.

SpaceX has vaulted to become one of the most valuable private companies in the world, with a valuation estimated at $28 billion. SpaceX has steadily raised private funding, doing so "bit by bit," Shotwell said in May, as SpaceX only wants "to just do it as we need it."

"We're being very picky about who invests in the company. They have to share our vision — long term vision," Shotwell said. "We want investors with patience as well as excitement about what we're trying to do."

The rocket company is one of the most popular private companies in the world because "investors of all types ... want to get into SpaceX," private market analysis group Equidate's Robert Hilmer told CNBC in April. A Morgan Stanley report last year said it was "reasonable" that SpaceX would "look to access capital in the public markets," adding that "public investors will start to pay more attention to space when or if SpaceX decides to IPO."

Shotwell emphasized in May that discussions about an IPO are few and far between at SpaceX, saying the company doesn't "talk too much about going public right now."

"We keep our heads down and focused on doing the work that we have to do, trying to achieve the vision that Elon sets out for us," she said.