Three decades after its founding, SpaceX’s market debut has finally arrived, and with it a dose of nostalgia from its co-founder, who took to social media to celebrate the journey of “employee number one.” The listing, which values the rocket maker at well over $150 billion, is the largest tech IPO in a decade, but it also raises serious questions about the fiscal discipline of an industry that has long ignored the bottom line.
The co-founder’s tweet, reminiscing about the early days in a small office in El Segundo, California, was a masterclass in branding. It painted a picture of scrappy innovation, of engineers sleeping under desks, of a startup that defied the odds. But let’s not get carried away. This is the same company that has burned through billions in venture capital and government contracts, with a profitability timeline that remains as elusive as a clear day on Mars.
The market, however, has spoken. The shares popped 45% on the first day of trading, giving SpaceX a market cap that surpasses Boeing and Lockheed Martin combined. In a world of low interest rates and quantitative easing, such valuations are almost rational. The Federal Reserve’s loose monetary policy has inflated asset prices across the board, and tech is the prime beneficiary. But as inflation ticks up and gilt yields rise, the cost of capital is about to bite. When the price of money goes up, speculative ventures like reusable rockets and space tourism become a tougher sell.
The broader implications are clear. This IPO is the canary in the coal mine for the tech sector’s relationship with fiscal responsibility. For years, investors have been willing to overlook cash burn in favour of growth. But with the Bank of England and the Fed hinting at tighter policy, the mood is shifting. Capital flight from growth stocks is already underway, as evidenced by the recent sell-off in unprofitable tech names.
SpaceX itself is not immune. Its Starlink satellite internet division, while promising, requires massive upfront investment and faces competition from established telecoms. The Starship programme, meanwhile, is still years away from generating revenue. The company’s success has always been tied to its ability to secure government contracts, a reliable source of income when private markets are less forgiving. But with the US government’s own fiscal position deteriorating, the days of easy subsidies may be numbered.
From a strict market efficiency perspective, the IPO is a welcome event. It provides liquidity and price discovery for a previously opaque asset. But the valuation stretches credulity. SpaceX is now trading at 200 times earnings, if we use its 2023 net income of $750 million. That multiple makes sense only if you assume a future where space travel is as common as air travel. That is a big if.
The financial establishment has been slow to react. The City of London, my usual beat, has yet to see a British space company of similar scale. But the message is clear: the tech sector is changing, and the era of free money is ending. Investors should be wary of chasing growth at any price. The co-founder’s story of employee number one is heartwarming, but it will not pay the bills when the markets finally demand a return.
