When a company decides to go public, they're required by the
Securities and Exchange Commission to file an S1
prospectus. Historically, these are some of
the driest documents ever committed to paper.
They're written by corporate lawyers for other corporate
lawyers to ensure that no one, anywhere is ever accidentally
entertained. But two days ago, SpaceX filed
its paperwork to go public, and reading through it, it became
immediately clear that this was not going to be your typical
legal disclosure. First start.
It opened with 14 pages of photographs of rockets and
satellites, which reminded me of Adam Newman's I'll fated Wework
prospectus, which famously opened with the line.
We dedicate this to the energy of we greater than any one of
us, but inside each of us. That document was later
described as one of the worst IPO filings in Wall Street
history. The SpaceX prospectus is
similarly unconventional, though I will say the Rockets are more
photogenic than the Wework community photographs were.
The document is also filled with phrases that I'm fairly
confident have never appeared in an SEC filing before.
Under the Business Strategy section, right alongside
standard disclosures about lease agreements and accounting
standards. Management explains that their
primary objective is to extend the light of consciousness to
the stars, a phrase that appears 10 separate times in the filing,
which suggests that it wasn't a typo.
Investors are also warned that we do not want humans to have
the same fade as dinosaurs, which is a fairpoint.
I suppose. It's the kind of sentence that
gets you excited about what the risk disclosure section will
look like. The document then goes on to
outline a string of future business lines that read like
science fiction. They include long haul, point to
point terrestrial travel, which I think means travelling around
the Earth in rockets rather than in airplanes.
In orbit manufacturing? Yes.
In orbit passenger and cargo transportation to the Moon and
Mars, manufacturing and energy production on the Moon and Mars,
and asteroid mining. Because why mine for resources
on Earth when you can chase down an asteroid in the hope that
you'll find useful minerals on it?
The acronym AI appears over 200 times in the document.
The word consciousness appears 10 times.
The word profit appears somewhat less frequently than either of
those. What we're looking at is quite
possibly the most extraordinary document in the history of
American securities regulation. And today we're going to go
through it. Because every single thing I'm
about to tell you, no matter how absurd it sounds, comes directly
from the filing. If you've been following SpaceX
for the last two decades, you probably think of it as a rocket
company. In recent years, with the rapid
expansion of Starlink, you might have updated that to a satellite
Internet company. But if you read the IPO
prospectus, you're in for a surprise.
SpaceX is now apparently an AI company.
According to the document, 93% of the company's total
addressable market is attributed to AI, and based on the capital
expenditure breakdown, roughly 60% of all spending is now going
into artificial intelligence infrastructure.
The prospectus breaks down the business into 3 segments, Space,
connectivity, and AI. In the first quarter of 2026,
the space division, the part that actually builds and
launches rockets, lost $662,000,000.
The connectivity division, which is Starlink, turned a $1.1
billion profit. The AI division lost 2 1/2
billion dollars in just the last three months.
The only division that makes money is the satellite Internet
business. Everything else loses money.
When Musk says that this is an AI company, what he means is
that the one business that actually works is subsidizing a
money losing AI venture while he tries to convince public market
investors that the money losing AI venture is the entire reason
the company's worth $1.75 trillion.
If we look past the talk of extending consciousness to the
stars and focus purely on the income statement, the financial
reality of SpaceX is bracing. In 2025, the company generated
$18.7 billion in revenue. Now $18.7 billion is a lot of
money, but at a proposed valuation of $1.75 trillion,
SpaceX is asking investors to value it at almost 100 times
it's revenue. If SpaceX were dropped into the
S&P 500 today, it would be the 7th largest company in the index
by market cap. But if you ranked it by actual
revenue, it wouldn't even meet 200.
It would be down near Kellogg's, the maker of fruit Luke's
breakfast cereal. You get the point.
Unlike Kellogg's, SpaceX is not profitable.
Space exploration is just a tougher business than breakfast.
Last year, SpaceX posted a net loss of $4.94 billion.
What makes this number remarkable is that Starlink
actually generated $4.4 billion in operating profit.
That means the rest of the business ate up more than $9
billion in a single year. Since its founding, SpaceX has
accumulated over $37 billion in losses, more than any other
company that has ever gone public in history.
And there are no signs of the cash burn slowing down.
Capital expenditure reached $20.7 billion last year,
quintupling from 2023, driven by Starlink expansion, Starship
development, and AI infrastructure spending.
To fund all of this, the company is carrying $29 billion in debt,
including a $20 billion bridge loan taken out in March 20268
weeks ago. So when investors hand over $75
billion in this IPOA, meaningful portion of it may not be going
to orbital data centers or a Mars colony.
It goes straight back to the banks who lent SpaceX money 8
weeks ago. Now, to be fair, the company is
growing. Revenue is up somewhere between
33 and 43% annually, which is genuinely impressive.
But that growth is coming entirely from Starling, not the
AI business. And even that growth comes with
a caveat. Starling's average revenue per
user has fallen by around 18% since 2023, three as the
company's discounting aggressively to juice it's
subscriber numbers before the IPO.
Back in April 2018, Gwynne Shockwell, the president of
SpaceX, stood on a Ted stage and made the promise.
Within a decade, she told the audience, people would be taking
30 minute rocket trips from New York to Shanghai.
These rockets would compete with long haul airlines making up to
10 flights per day. That decade expires in under 2
years now, which is not much time to figure out how to safely
replace the jumbo jet with a reusable ballistic missile that
requires passengers to withstand 3GS at takeoff.
Now if you were paying attention earlier, you may remember the
phrase long haul point to point terrestrial travel.
From the prospectus that is this product.
It is still being pitched to investors as a future revenue
stream. There's no sign of a commercial
commuter rocket and there are under 2 years left on the clock.
In the list of yet to be realized business lines, there's
a section on payment processing. Twitter, Elon Musk's Everything
app, has been talking about becoming a financial services
platform for several years now. They've secured money
transmitter licenses in a handful of U.S. states, but they
don't have a functioning payments product yet.
So SpaceX is now partially in the business of filing paperwork
with the Nevada Department of Business and Industry in pursuit
of the dream of processing an $8 peer-to-peer payment on a rocket
company social media platform. SpaceX claims its total
addressable market is $28.5 trillion.
This is larger than the entire GDP of the United States and
almost entirely built on businesses that do not yet
exist. As the Financial Times Lex
column noted, the market has never before had to price a
stock this speculative at this size, which is probably worth
keeping in mind. According to the prospectus,
enterprise applications of AI make up to 80% of Spacex's total
addressable market. This means they expect large
businesses to pay for masks, AI tools to improve productivity.
If you add in consumer AI, the total AI share of the claimed
addressable market rises to 93%. So 93% of the company's value is
grog. Now I want to be careful here
because 80% of a $28.5 trillion market is an enormous number.
So it's worth asking which enterprises are currently using
Grok. And from what I can tell, the
primary documented use cases for Grok are fact checking tweets
and generating non consensual nude images that have resulted
in regulatory investigations in Spain, France and the UK and at
least one ongoing lawsuit, which is not exactly the enterprise
productivity pitch that I was expecting.
The filing effectively concedes that the enterprise AI market is
dominated by Open AI, Anthropic and Google.
Spacex's own AI product, Grok, holds a market share of roughly
3.4%, according to Bloomberg. Spacex's own engineers have been
slow to adopt Grok for technical work because it underperforms
rival tools. Last month, Musk himself said
that the AI code would need to be rebuilt from scratch.
Shortly after, he sold XAI to SpaceX for $250 billion.
His solution to Grok's weakness in coding was to attempt to
acquire CURSOR, the tool his own engineers were actually using,
for $60 billion with a $10 billion break fee.
If the deal falls through, the company whose AI product
represents 93% of it's claimed addressable market, has a
flagship product it's own engineers won't use, and is
spending $60 billion trying to buy a competitor so that they
can get it to work. Spacex's near term AI revenue
story rests substantially on a $15 billion a year deal to rent
compute capacity to Anthropic, one of the very competitors
whose existence proves the Grok is losing the AI race.
So SpaceX is basically Space Core Weave.
If SpaceX were genuinely going to be a dominant AI company, it
would need that computing power that it owns for its own models.
If Volkswagen were renting out all of its car factories, would
anyone describe Volkswagen as still being in the car business?
The more pressing problem is that this $15 billion a year
contract, roughly 40% of projected near term revenues,
can be cancelled by Entropic with 90 days notice.
Spacex's entire AI business model at the moment is renting
GP us to a competitor on terms that can vanish in a fiscal
quarter. If Spacex's total addressable
market is 28 1/2 trillion dollars and 93% of it is AI I,
then by Spacex's own logic, the leading AI companies must be
worth vastly more than SpaceX and Tropics quarterly revenue is
already roughly double Spacex's entire AI segment revenue.
Both on Tropic and Open AI are reportedly filing for IPOs at
approximately $1 trillion valuations, and yet SpaceX wants
$1.75 trillion on the basis of a market it's direct competitors
are winning. Now, if you've been wondering
exactly who is buying the Tesla Cybertruck, the SpaceX
prospectus finally provides an answer.
It turns out it was SpaceX. According to the filings, SpaceX
purchased $650 million in goods from Tesla last year.
This included 131 million spent on Cybertrucks, all at full
retail price. No volume discount, which is
notable given how hard Tesla has found them to sell.
That works out at roughly 1500 vehicles at one point in the
fourth quarter of 2025. SpaceX single handedly accounted
for 18% of all Cybertruck registrations in the United
States. Using shareholder money from one
company that you control to support the sales figures of
another company you control, right before both companies face
major financial events is generally considered not ideal
corporate governance. There is also a small accounting
discrepancy worth mentioning. SpaceX reports buying roughly
$650 million of goods from Tesla last year, and Tesla's own
filings report selling $573 million of goods to SpaceX.
So somewhere between Austin and Boca Chica, $77 million seems to
have fallen off the back of a truck, presumably a cyber truck.
But a few thousand overpriced pickup trucks are the least of
the related party concerns in this document.
Antonio Gracias is a long term Musk ally and sitting member of
the SpaceX board of directors. He also runs a private
investment firm called Valor Equity Partners.
According to the IPO prospectus, SpaceX and XAI are carrying more
than $20 billion in AI infrastructure lease obligations
tied to agreements with entities connected to valor.
Some of these deals are structured as what accountants
call failed sale leasebacks. Normally, in a sale leaseback, a
company sells an asset to an investor, gets cash upfront, and
leases the asset backed, removing it from the balance
sheet. When the transaction fails to
qualify as a genuine sale under accounting rules, the asset
stays on the books and the associated payment obligations
get recorded as dead. Instead.
The practical effect is that SpaceX is carrying billions in
obligations to a firm run by one of its own board members on its
balance sheet as dead. It's once again considered good
practice to board members who don't have $20 billion worth of
high interest financial loans with the company they're
supposed to be overseeing. But anyhow, back in 2016, Elon
Musk used Tesla shareholder money to acquire Solar City, a
struggling solar company that he also chaired and partly owned.
To help justify the deal, he staged a public demonstration of
Solar City's Solar roof tiles during the acquisition
negotiations. The tiles were later found by a
Delaware court to have been actually inoperable and far from
ready to go to market at the time of the demonstration.
The court reviewed the entire transaction under it's strictest
standard of scrutiny, describing the process as deeply flawed,
noted Musk's apparent inability to acknowledge his clear
conflict of interest, and then found the deal entirely fair
anyway, largely because 85% of the shareholders had a approved
it and Tesla stock subsequently went up.
The judge declined to award Musk his legal costs, which is the
Delaware Court of Chancery's version of a strongly worded
letter. Musk later had a falling out
with Delaware over his Tesla pay package and reincorporated in
Texas. He has now completed a
structurally similar acquisition, this time of XAI,
in a state with far more LAX securities rules.
In Texas, to bring a derivative lawsuit against SpaceX, a
shareholder must own at least 3% of the company.
At the current valuation, that's approximately $52 billion worth
of stock. To win any lawsuit, they must
prove not just a breach of fiduciary duty, but specifically
fraud, intentional misconduct, or a knowing violation of law.
A conflicted transaction, even one with no independent
oversight whatsoever, does not meet that standard on its own.
And if you wanted to go looking for the internal emails that
might help you to prove fraud, as shareholders did so
effectively in Delaware, Texas corporate law now explicitly
excludes emails and text messages from shareholder
document requests. When Tesla reincorporated in
Texas, Governor Greg Abbott posted on Twitter to personally
congratulate Musk and wish him well, which gives you a
reasonable sense of the regulatory environment.
The lesson that Musk appears to have drawn from Solar City is
not don't do conflicted acquisitions, it's do them
somewhere with friendlier corks. The clearest beneficiaries of
this acquisition are not the SpaceX engineers trying to get
to Mars. They're the venture capitalists
and banks, including Morgan Stanley, who were at first stock
holding billions in underwater debt from Musk chaotic buy out
of Twitter. Thanks to the XAI SpaceX merger,
those lenders have been made whole in SpaceX equity,
conveniently timed just before the largest IPO in history.
Now, historically, investment bankers won IPO mandates by
demonstrating deep sector expertise, long term advisory
relationships, and a willingness to work extremely long hours.
It used to be quite a dignified business.
The first sign of slipping standards in investment banking
came in 2007 when the Goldman Sachs bankers who were pitching
for the Lululemon IPO mandate turned up to the meeting led by
David Solomon, also known as DJ Diesel, dressed head to toe in
Lululemon at leisure wear. I want to be clear here, this
slipping standards may well have been the event that triggered
the global financial crisis that year.
DJD Salter, bad boy of corporate finance this time around,
boasted to the press that he secured the lead left position
on the largest IPO in history by having his staffers help him
send Elon Musk a direct message on Twitter.
Morgan Stanley, which had cultivated A Musk relationship
for years through their star tech banker Michael Grimes, is
listed as Co lead. Their name appears second in
alphabetical order, directly after Goldman Sachs.
Morgan Stanley was apparently so furious about this that they
forced SpaceX to explicitly clarify in the term sheet that
the listing is purely alphabetical. 23 banks have
cramped their names onto the cover of this prospectus.
The fees constitute the most lucrative Wall Street IPO payday
ever. The only evidence of enterprise
usage of Musk's Grok AI may well be the millions of dollars of
licenses that Musk is forcing on his lead IPO banks.
All of this brings us to the corporate governance structure
of SpaceX, which is perhaps the most heavily fortified
dictatorship ever brought to US public markets.
The company will have a dual class share structure.
Regular investors will get Class A shares, which carry one vote,
and Elon Musk gets Class B shares, which carry 10 votes
each. While Musk only owns around 41%
of SpaceX, he will control more than 85% of the votes, meaning
that he can't ever be fired by shareholders.
The company has also placed limits on how shareholders can
file legal challenges, as SpaceX writes in the prospectus.
This will limit or preclude your ability to influence corporate
matters and the election of our directors.
On top of that, because Elon must convince NASDAQ to change
their index inclusion methodology in order to win this
listing, SpaceX will be fast tracked for inclusion in the
NASDAQ 100 index. This is a massive deal.
The NASDAQ 100 is tracked by over $600 billion of passive
investor money. By fast tracking SpaceX into the
index, countless pension funds and passive investors will
become forced buyers of the stock almost immediately, long
before there's any serious price discovery.
And they'll own shares in a heavily cash burning company
where they've no voting power and no meaningful ability to sue
management. Musk has ensured that he will
never lose his control over SpaceX.
The filing reveals the creation of a new Class C non voting
stock. This exists so that SpaceX can
acquire other companies in the future using that stock without
ever diluting Musk's voting power.
And if he ever decides to step down, he can place his super
voting shares into trusts, passing those super voting
shares onto his children, ensuring dynastic control.
Finally, we get to his compensation package.
You've most likely read about how Musk is getting 1 billion
performance based restricted shares, and how these shares
only vest when SpaceX establishes a permanent human
colony on Mars and hits a 7 1/2 trillion dollar market cap.
SpaceX explicitly describes the achievement of these milestones
in the prospectus as being improbable.
To be clear, this is not a sudden burst of candor from
management. It's instead a bit of an
accounting trick. Under accounting rules, if the
company admitted that it was probable that Musk would get
these shares, they would have to expense the full value of the
award, potentially hundreds of billions of dollars, on their
income statement today. By categorizing the share grant
as improbable, it gets booked at 0 cost.
But there's a trick. As law professor Anne Lipton
points out, Musk doesn't actually need to achieve any of
those hard to reach goals. He gets the utility of these
shares immediately. He can vote them today.
He can collect dividends on them today.
And with the approval of a board that he entirely controls, he
can pledge them as collateral for loans to get access to tax
free cash. Today he gets all the benefits
of owning the shares immediately, based on a Mars
colony that the company admits he will probably never build.
Now possibly the most extraordinary line in the entire
prospectus is this. SpaceX renounce certain
corporate opportunities that may be presented to Mr. Musk and
certain of our directors and their respective affiliates, and
such persons may have no duty to present such opportunities to
us. What this means is that nothing
stops Elon Musk from setting up a separate private company
tomorrow to pursue whatever the next big tech trend is, rather
than doing it inside SpaceX. Which, if you remember him
claiming Tesla was an AI company and then immediately starting X
AI as a separate competing private entity is a fairly
relevant risk. As I'm Lipton summarized it,
public shareholders in SpaceX will have no votes that matter,
no ability to sell at a fair price discovered through normal
market mechanisms, and no ability to sue the company for
wrongdoing. No votes, no sales, no suits.
There's one technology at SpaceX that everything else depends on.
Not the AI, not the satellite Internet, not the Mars colony.
One rocket. Starship, the largest rocket
ever built, is supposed to be the key to everything.
Cheaper launches, bigger Starlink satellites, orbital
data centers, a city on Mars, the NASA contracts.
Without Starship, the entire $1.75 trillion story falls apart
entirely. Yesterday, Barron's wrote that
the Starship launch was a bigger deal for SpaceX than the IPO
filing itself. The latest version of the rocket
was supposed to launch before the IPO filing, but that launch
was postponed. It was then supposed to launch
yesterday, the day after the filing.
Nicki Minaj even turned up to watch, but there were technical
difficulties, according to the news.
They're going to try again today, so we'll have to see how
that go. The problem so far is that
Starship hasn't yet worked. It's still in the rapid
unscheduled disassembly phase of its development.
It is yet to carry any cargo to orbit other than the banana.
So as Barons rightly states, this launch is really going to
matter. The entire investment pieces is
built around Starship achieving what SpaceX themselves call an
insane flight rate. Hundreds of launches per year,
each carrying 200 tons into orbit.
Starlink version 3 satellites, which are supposed to provide 20
times the capacity of current models, are too large for the
existing rockets and require Starship.
The Orbital Data Center concept requires Starship to launch
1,000,000 satellites. The Mars colony requires
Starship to work reliably enough to transport 1,000,000 people
who I guess want to go there. If Starship fails to deliver, if
the flight rate is half of what is promised, if the reliability
is lower, and if the costs are higher, the entire valuation
collapses. The $1.75 trillion number
assumes Starship works exactly as advertised, on schedule, with
no technical setbacks. History suggests that rockets
rarely work exactly as advertised, so the company
claiming to be worth $1.75 trillion is depending on a
rocket that is yet to figure out how to land without exploding,
which is a risk. Now, IPO prospectuses are
required to tell investors specifically what the company
will do with their money. This is called the use of
proceeds. A piece by Cape Fear Advisors
points out how hard you have to dig, including through the
footnotes, to grasp the full picture of Spacex's use of
proceeds. The IPO is expected to raise
between 50 and $75 billion. When you add up all of the
commitments buried in the document, the company needs
approximately $235 billion over the next few years, between
three and five times the IPO proceeds.
What this means is that the IPO is not the end of fundraising,
it's just the beginning. Matt Levine summed up how
investors should think about this vibes based investment.
In his Money Stuff newsletter, he writes if you're buying
SpaceX stock to tell Elon Musk what to do, you should stop.
If you're buying SpaceX stock because you want exposure to the
space AI business but you have your doubts about current
management, you should stop. If you're buying SpaceX stock
because you like Elon Musk and want to go along for the ride
with him, yes, that's correct. That's the investment thesis
here. If later you're disillusioned
with Elon Musk, if you feel that you were misled that he didn't
do the stuff he promised to do, well, that's kind of his whole
thing. Thanks for tuning into this
week's podcast. If you found it interesting, I'd
really appreciate a five star rating or a short review on
whatever podcast app you use. It really helps the podcast to
grow. Have a great week and talk to
you again soon. Bye.