If SpaceX really is staring down a potential bankruptcy, at least it wouldn't be the first time.
On Tuesday, CNBC obtained a copy of a letter that SpaceX CEO Elon Musk sent to his employees the day after Thanksgiving, in which the billionaire said the rocket company could be at "genuine risk of bankruptcy," unless it can speed up production of the Raptor engines that power its Starship rockets.
Each rocket flight could require as many as 39 Raptor engines. "We face genuine risk of bankruptcy if we cannot achieve a Starship flight rate of at least once every two weeks next year," Musk wrote. "We need all hands on deck to recover from what is, quite frankly, a disaster."
On Tuesday, Musk replied to a tweet about his comments with some added context, noting that bankruptcy for SpaceX, while "unlikely," is also "not impossible," especially if the global economy suffers a downturn before the company can get its Starship program up and running. Musk also pointed to auto giants like General Motors and Chrysler, both of which filed for bankruptcy during the Great Recession in 2009, and he included a quote from former Intel CEO Andrew Grove: "Only the paranoid survive," which was Grove's famous slogan.
It's not SpaceX's first brush with serious financial risk: Musk has often spoken about how risky it was to launch the company in 2002, and how it nearly failed just a few years later. Last year, Musk tweeted that "in the early days" of launching both Tesla and SpaceX, he had very little faith that either venture would succeed.
"I thought there was >90% chance that both SpaceX & Tesla would be worth $0," he wrote.
In 2013, Musk spoke at a Google for Startups event about how SpaceX nearly went under after its first three attempted rocket launches all failed between 2006 and 2008. The issue was simple: He'd invested roughly $100 million of his own money to found SpaceX, which only covered three attempts to launch a rocket into orbit.
The first three attempts failed — the first due to a fire, while the next two simply failed to reach orbit. "I thought 'OK, we can afford three launches.' And, then the third one failed," Musk said. "It was a very, very painful exercise. We were just too stupid to know how to make a rocket go to orbit."
Instead of folding the company, Musk said, he invested more of his own money — just barely enough for a fourth launch. In a 2017 speech at the International Astronautical Congress (IAC) conference in Adelaide, Australia, Musk noted that if the fourth launch failed, SpaceX would have closed down for good.
"That would have been it for SpaceX," Musk said. "But fate liked us that day."
That's because the fourth launch succeeded, reportedly due to engineers changing a single line of code to fix a problem from the third attempt. The success helped SpaceX land a commercial contract with NASA valued at roughly $1.6 billion, extending the young company a lifeline.
Today, SpaceX isn't nearly as young — and last month, it hit a $100 billion valuation, making it hard to believe that the company could truly be facing bankruptcy again. In October, a Morgan Stanley survey found that a majority of "institutional investors and industry experts" believe SpaceX could eventually become more valuable than Tesla, which currently has a market value of more than $1.1 trillion.
It's always possible that Musk is using the threat of bankruptcy as a motivational tactic for his employees. But as CNBC noted on Tuesday, the Raptor engines are essential to SpaceX's financial future — because the company will need its Starship rockets to launch its next generation of Starlink satellites into orbit.
"If you were to do a risk-adjusted rate of return estimate on various industry opportunities, I would put building rockets and [electric] cars pretty close to the bottom of the list," Musk said at a South by Southwest panel in 2018. "They would have to be the dumbest things to do."