Elon Musk’s space venture finally touched down on public markets today, and the City is still trying to calculate the trajectory. SpaceX’s historic market debut, priced at a staggering $85 per share, opened at a 40 per cent premium, instantly minting a new generation of paper millionaires. But beneath the headline-grabbing numbers lies a more uncomfortable truth for UK Chancellor Jeremy Hunt: British investors are pouring billions into American space stocks, and the capital flight is accelerating.
At the LSE’s morning briefing, the chatter was less about Falcon 9s and more about the yield gap. With UK gilt yields barely scraping 4 per cent and inflation still stubbornly above target, the allure of a company promising interplanetary transport and satellite internet is undeniable. “It’s a zero-sum game,” grumbled one fund manager over burnt coffee. “Every pound that goes into SpaceX is a pound not going into British infrastructure bonds.”
The debut itself was a masterclass in market theatre. SpaceX’s co-founder, speaking via a crackling satellite link from Boca Chica, Texas, promised “democratising access to space” and a dividend roadmap that, frankly, defies earthly economics. The market, however, does what it always does: it prices in hype. At a valuation of nearly $150 billion, SpaceX trades at over 20 times forward revenue, a multiple that would make a dot-com bubble veteran blush. Yet the IPO was oversubscribed 15 times, with retail investors in London clamouring for a piece of the action via spread-betting platforms.
For the Bank of England, this is a headache wrapped in a rocket booster. As UK real yields remain negative, the opportunity cost of holding sterling-denominated assets is rising. The FTSE 100, heavy with value stocks and mining giants, looks positively dowdy next to the Tesla-style momentum of SpaceX. “We’re seeing a classic case of capital flight disguised as portfolio diversification,” notes an analyst at a major clearing house. “The MPC can raise rates all it wants, but if there’s a higher return in Low Earth Orbit, the money will follow.”
And the fiscal implications are sobering. HM Treasury’s latest borrowing figures already show the cost of servicing national debt swallowing a fifth of tax receipts. A sustained exodus of retail savings into US equities would weaken sterling, stoke import inflation, and force the Bank to tighten further, choking off the recovery before it has truly begun.
There is a case for optimism, of course. The UK has its own space ambitions: Virgin Orbit may have fizzled, but OneWeb and Reaction Engines are still in the race. Yet without a liquid, high-growth domestic market, British investors will always look to the stars via Wall Street. The solution, as ever, is fiscal discipline and pro-growth tax reform. Until then, every SpaceX launch is a reminder that the UK's gravity well is too deep, and its escape velocity too low.
