SpaceX Believes Its IPO Is "Highly Dependent" on This 1 Catalyst
Written by Ryan Vanzo for The Motley Fool -> SpaceX claims a $28.5 trillion total addressable market. A single project could make or break that growth potential. SpaceX is getting ready to go public. With a targeted valuation of $1.77 trillion, SpaceX would instantly become on
SpaceX is getting ready to go public. With a targeted valuation of $1.77 trillion, SpaceX would instantly become one of the biggest IPO stocks in history.
Every investor should be asking themselves one question: Where exactly is this valuation coming from? Digging into the company's IPO prospectus is the best way to find out. Buried in this 370-page document is a surprising phrase: The company claims that long-term growth will be "highly dependent on the successful development and scaling" of a single project.
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SpaceX claims a total addressable market of $28.5 trillion -- which the company claims to be the largest total addressable market of any business in history. Breaking down that total opportunity set, however, reveals several critical details.
A whopping $26.5 trillion in value is associated with one opportunity alone: artificial intelligence (AI). Just $1.6 trillion in value is related to the company's Starlink internet service -- currently SpaceX's sole profitable division. Meanwhile, a paltry $370 billion is tied up in what SpaceX calls "space-enabled solutions." This segment includes rocket launches , the service SpaceX is arguably best known for.
From this information, you may think rocket launches won't be an important part of the SpaceX story long-term. But that would be missing the forest for the trees. Many of SpaceX's most valuable growth opportunities -- everything from launching a stand-alone Starlink Mobile service to establishing orbital data centers -- rely heavily on the company's launch capabilities. Most critical is the successful commercialization of its Starship megarocket, which would dramatically lower the costs associated with getting the aforementioned growth opportunities off the ground.
"In particular, our ability to execute our growth strategy is highly dependent on the successful development and scaling of Starship and the ability to increase our launch cadence, both of which are subject to challenges and uncertainties inherent in the development and deployment of new and complex technologies," SpaceX's IPO prospectus warns.
SpaceX CEO Elon Musk has a track record of hinging a company's entire growth runway on a single product launch. Musk claims that Tesla (NASDAQ: TSLA) was only a month away from bankruptcy while attempting to scale the company's first affordable vehicle, the Model 3. Scaling its next affordable model, the Model Y, experienced similar challenges. Today, however, those two models account for well over 90% of Tesla's auto sales. The bet, obviously, paid off big.
