What's the optimal timing for a SpaceX IPO?

[neilh]

A number of articles (and I think Elon Musk himself) have mentioned the possibility of an IPO at some point in SpaceX's future. An IPO of course has a number of advantages and disadvantages. On the plus side, an IPO would increase SpaceX's available capital and ability to potentially acquire other companies, and increase the worth of stock options held by SpaceX employees. On the minus side, bureaucratic paperwork for a publicly traded company is much higher, SpaceX would have to be much more open about its finances and future plans, and the necessity of having to frankly list all known risk factors in an IPO prospectus could be problematic from the perspective of attracting new business and a political perspective.

So, with that in mind, I thought it'd be interesting to start up a discussion on when (if ever) the optimal time for SpaceX to have an IPO is. Of course, this is a topic that most of us know fairly little about, but it could still be an interesting discussion.

Also, does anybody know anything about what the process/timing was like for when Orbital had its IPO in 1990? Based on this snippet I could find, Orbital actually planned to have its IPO before its inaugural Pegasus launch, but decided to delay it until after its (successful) inaugural launch due to the "relatively cool" stock market of the time. It did end up turning a profit in 1991, though:

http://books.google.com/books?id=k_7UECJUUMMC&pg=PA250&lpg=PA250&dq=1990+orbital+ipo&source=bl&ots=iRm0VU1DGD&sig=l8Nj33meHQ58w5vDEuWrYK1l4a4&hl=en&ei=CX4RTPXNDoaGnQe8iNSRAw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBIQ6AEwAA#v=onepage&q=1990%20orbital%20ipo&f=false

[beancounter]

Gwynn Shotwell indicated SpaceX IPO possible after first sucessful flight of F9 on The Space Show.  Don't have the exact episode but listened to it so definitely made.

Cheers.

[Zachstar]

I would say right now.

In the near term they wont be able to break even from these slow flight rates. However in the future the LARGE hole the perished Ares program created is going to allow potential for them to be a BIG player in the future.

[savuporo]

The optimal timing is when they have a pipeline filled for BOTH F1 and F9 launches, i have loads of free money to invest and in inexplicable manner each of Ariane, Proton and Atlas face problems with launch infrastructure and  reliability

[simonth]

You do an IPO whenever you can convince sophisticated investors to invest millions into the company at a high enough price per share. Normally that means that a company has at least a track record of about 2 years of good (and rising) profits from operations.

[neilh]

Gwynn Shotwell indicated SpaceX IPO possible after first sucessful flight of F9 on The Space Show.  Don't have the exact episode but listened to it so definitely made.

Cheers.

I think I recall that as well. I previously assumed that would be too early, but after seeing that Orbital almost had their IPO even before their first successful flight (and did end up having their IPO after only one flight), I'm not so sure anymore.

[neilh]

For reference, here's the basic data from the prospectus for Elon Musk's other company, Tesla Motors. They filed for the IPO in January 2010 for an amount of up to $100M. I don't believe an IPO date has been set yet:

http://www.sec.gov/Archives/edgar/data/1318605/000119312510017054/ds1.htm#toc51863_2

We were incorporated in 2003 and began selling the Tesla Roadster in 2008. As of December 31, 2009 we had 514 employees worldwide.

Since inception through September 30, 2009, we have generated $108.2 million in revenue. As of September 30, 2009, we had an accumulated deficit of $236.4 million and had experienced net losses of $30.0 million for the year ended December 31, 2006, $78.2 million for the year ended December 31, 2007, $82.8 million for the year ended December 31, 2008, and $31.5 million for the nine months ended September 30, 2009.

[AdamH]

I understand the Tesla IPO, however given Elon's often stated aspirations for SpaceX I doubt he will seek an IPO unless he forsees the company having problems which would require the additional funding. For what it matters my bet is that if everything goes smoothly Elon wont seek an IPO at least until after crewed-dragon has flown, and possibly until Merlin-2/BFR if he can manage to get a partnership contract with NASA to help with development. I think those are his main goals, I could definately see an IPO after that point but who knows.

[ChefPat]

Why would people buy SpaceX shares? Are they investing in Satellite launch or a Mars Colony? If it's Satellite launch will they be able to do enough of this to return on investment? Because there isn't a chance in Hades that a Mars Colony will be able to turn a profit for the foreseeable future.
Potential investors, the real ones that have the real money, are going to want to see a concrete path to dividends.
IMO an IPO will not be issued until a business case can be seen as clearly as a line on a map.

[Dave G]

I think the IPO will wait until Congress resolves Obama's plan for NASA moving forward. 

[kevin-rf]

Careful what you wish for, when they IPO the company will be more driven by the bottom line and investors and less by innovation and Elon. The longer they go without an IPO, the more new and exciting things we will see out of SpaceX.

Besides if you have tons of cash burning a hole in your back pocket, there are a bunch of other "New Space" companies that could make good use of your money. Masten/XCOR/Armadillo/Flowmetrics come to mind.

[simonth]

I understand the Tesla IPO, however given Elon's often stated aspirations for SpaceX I doubt he will seek an IPO unless he forsees the company having problems which would require the additional funding. For what it matters my bet is that if everything goes smoothly Elon wont seek an IPO at least until after crewed-dragon has flown, and possibly until Merlin-2/BFR if he can manage to get a partnership contract with NASA to help with development. I think those are his main goals, I could definately see an IPO after that point but who knows.

An initial public offering can be done for two reasons and in most instances it is done for both at the same time: 1. fresh capital to foster future plans of the company 2. for current shareholders (including employees) to sell part of their shares (=make money) and have a market to sell shares in the future at any given time. In addition, taking a company public also has a strategic marketing effect and helps to strengthen the internal organisation.

In any event, an initial public offering depends on what analysts estimate SpaceX is worth. Based on those estimates a price range is calculated that investors can place orders in a given period after the prospectus is published. Based on the interest in the company's offered shares, the price is eventually calculated and the shares are sold. There are many high risk investors who might at the moment be willing to buy shares in the company (that's where they get strategic risk capital), but the price they are currently willing to pay is actually not very high. This means, unless the current SpaceX shareholders want to sell the company cheap (which I doubt), they will wait until they have established a track record that allows analysts to provide reasonable estimates for future growth rates and profitability.

[subzero788]

Gwynn Shotwell indicated SpaceX IPO possible after first sucessful flight of F9 on The Space Show.

I recall that she said after the 2nd successful Falcon 9 flight

[SpacexULA]

After Elon Musks marital situation is completely buttoned up.

After Falcon 9 has had a 100% successful mission (no roll, recovery not needed)

[simonth]

Gwynn Shotwell indicated SpaceX IPO possible after first sucessful flight of F9 on The Space Show.

I recall that she said after the 2nd successful Falcon 9 flight

The full quote was (April 2010): "We would have to get Falcon 9 into orbit reliably. So (any time) after the second successful Falcon 9 orbital flight there would be an opportunity, I think." And to the follow-in question of "An the market needs to be right for it?" "Yes, right, but tech stocks look a lot better this year than last year."

[cuddihy]

DaveG is on the right track. Like Tesla before the "Green loans," they will wait on Federal big money before going IPO.

Here's my estimated conditions/timeline for when they would file:

-COTS 1 successful
-1 commercial F9  launch hard-scheduled
-Commercial crew RFP that SpaceX can meet on the street

and for when they would IPO:
-COTS complete and CRS underway
-3 successful F9 launches in a row
-one commercial F9 under their belt.
-commercial crew awarded to SpaceX.
-Dow above 9500 (don't laugh, next year looks scary).

[rklaehn]

I would prefer an IPO as soon as possible. Of course investing in SpaceX would be a relatively risky investment, but then at least there is also the potential for high payoff.

For small investors it would be best if there was some kind of newspace ETF tracking an index containing all companies doing something innovative in space. This would obviously contain companies like SpaceX, Orbital, Bigelow, but also bigger companies like ULA that have shown some interest in doing space related activities in a more streamlined way, and private equity companies that invest primarily in small space startups such as Masten, Armadillo, XCOR.

I would invest significant (for me) money in such a product in a second. But it is probably a bit too early for that.

[simonth]

DaveG is on the right track. Like Tesla before the "Green loans," they will wait on Federal big money before going IPO.

Here's my estimated conditions/timeline for when they would file:

-COTS 1 successful
-1 commercial F9  launch hard-scheduled
-Commercial crew RFP that SpaceX can meet on the street

and for when they would IPO:
-COTS complete and CRS underway
-3 successful F9 launches in a row
-one commercial F9 under their belt.
-commercial crew awarded to SpaceX.
-Dow above 9500 (don't laugh, next year looks scary).

You normally don't file your red herring (that's the incomplete prospectus without the price and share information in it) if you don't want to issue your shares right away. It just doesn't make any sense. The process to that point is hard and long and costly due to the involvement of banks and lawyers.

That Tesla filed their a preliminary registration statement in January and have since not completed an offering is not something that's the usual process. But Tesla's IPO effort is a rather small one anyway (100 million is not very much).

P.S. the process of starting an initial public offering takes up to 6 months (start of getting investment banks involved) and it does not appear that SpaceX has yet started the process. That means end of winter or spring 2011 is basically the earliest possible date for an initial public offering.

[cuddihy]

You normally don't file your red herring (that's the incomplete prospectus without the price and share information in it) if you don't want to issue your shares right away. It just doesn't make any sense. The process to that point is hard and long and costly due to the involvement of banks and lawyers.

That Tesla filed their a preliminary registration statement in January and have since not completed an offering is not something that's the usual process. But Tesla's IPO effort is a rather small one anyway (100 million is not very much).

P.S. the process of starting an initial public offering takes up to 6 months (start of getting investment banks involved) and it does not appear that SpaceX has yet started the process. That means end of winter or spring 2011 is basically the earliest possible date for initial public offering.

good to know. So forget the "when they would file" step, I think the IPO conditions stay pretty much the same.

Says to me earliest possible IPO winter 2011/2012.

[mlorrey]

Careful what you wish for, when they IPO the company will be more driven by the bottom line and investors and less by innovation and Elon. The longer they go without an IPO, the more new and exciting things we will see out of SpaceX.

Besides if you have tons of cash burning a hole in your back pocket, there are a bunch of other "New Space" companies that could make good use of your money. Masten/XCOR/Armadillo/Flowmetrics come to mind.

This all depends on how much of the company they offer to the public, and what sort of shares they are.

As for Tesla, Elon already has issues with dilution of voting shares but survived one attempt by other investors to take over the company. He was able to extract as his salary enough voting shares to put him back in control of things there.

SpaceX could do an IPO of nonvoting shares which would be dividend paying and Elon wouldn't lose any control in doing so.

Both Microsoft and Amazon have done IPOs without their founders losing control of things.

As for timing, I agree that the best time for an IPO would be after congress resolves its issues with Obama's plan, and preferably after a successful Dragon cargo docking with ISS. This would ensure maximum share value given a successful contract acquisition/performance. At that point, Elon could offer 15-20% of the company at IPO to raise maybe 2 billion dollars.

So, I predict an IPO no earlier than Summer 2011 and more likely by summer 2012.