What's the optimal timing for a SpaceX IPO?

[ArbitraryConstant]

The IPO seems to be slipping to the right at the same rate as the manifest. I recall hearing maybe 2-3 years ago that they would likely go public after the second successful F9 launch. Not that there's any rush.

Makes sense. If they IPO before they're launching routinely, the stock will be under-valued to compensate for the risk.

[dcporter]

Makes sense. If they IPO before they're launching routinely, the stock will be under-valued to compensate for the risk.

Or overvalued due to the hype.

The IPO seems to be slipping to the right at the same rate as the manifest. I recall hearing maybe 2-3 years ago that they would likely go public after the second successful F9 launch. Not that there's any rush.

No hurry if they have cash – Elon doesn't want to give up control, only have capital to keep moving forward or protect against a LOC event.

[Blackjax]

Personally I'd be happy if the IPO slips indefinitely into the future for a couple of reasons. 

First, being able to fund your efforts via goods and services sold to the market is a good sign of a sustainable enterprise.  20 years from now I don't want to be an 'Orphan of SpaceX' agonizing over the commercial space revolution that wasn't because SpaceX outpaced their resources by losing contact with their markets rather than growing them in sustainable steps.  Too much cash on hand can cause a rapid expansion followed by an implosion.

Second, one of the most important things about SpaceX is that it is run by a leader with a firm vision, tons of motivation, and who has the freedom to make risky calls without having to spend too much time justifying them to others.  The more investors there are, and the more SpaceX heads towards being a publicly traded company with all the regulation that entails, the more control he is ceding or putting at the risk of being taken from him by legal action.  I know he plans to structure the offering to limit the impact on his control, but the fact remains that many new investors means many new people with legal standing to sue over the direction of the company.  Love him or hate him, it is Elons personality and vision which makes the goal of SpaceX to open up space rather than to simply make money as the tradition aerospace firms do.  If his control slips, we all lose.

[subzero788]

I agree with you blackjax. I'm a little worried how an IPO will change the company. On the other hand, the extra cash might help speed up development of some of their non-NASA funded projects. Only time will tell.

[ArbitraryConstant]

I don't want to suggest your points are without merit, because I don't think that's true, but:

First, being able to fund your efforts via goods and services sold to the market is a good sign of a sustainable enterprise.

I'm certain this is why they want to wait at least until they've got routine commercial launches happening.

I know he plans to structure the offering to limit the impact on his control, but the fact remains that many new investors means many new people with legal standing to sue over the direction of the company.

SpaceX will be accumulating shareholders anyway, just by virtue of the fact that so much of their compensation is based on equity. As the number of shareholders grows, those risks and regulation increase whether or not they IPO.

And ultimately, SpaceX has a lot of people working crazy hours in exchange for equity. They're not going to do that unless they believe there's a credible chance it'll be worth something someday, and that means being able to sell someday.

[Blackjax]

SpaceX will be accumulating shareholders anyway, just by virtue of the fact that so much of their compensation is based on equity. As the number of shareholders grows, those risks and regulation increase whether or not they IPO.

True but I'd submit to you that a lot of employees in a company like SpaceX are true believers and are a totally different breed than people who might invest in a publicly traded SpaceX primarily as a financial investment.

And ultimately, SpaceX has a lot of people working crazy hours in exchange for equity. They're not going to do that unless they believe there's a credible chance it'll be worth something someday, and that means being able to sell someday.

There is a difference between working crazy hours in exchange for equity and working crazy hours and receiving equity.  One implies it is a major reason for the 'working crazy hours' and the other does not.  One of the lessons in business school that kinda shocked me at the time but which now makes complete sense to me is that money is not generally a motivator for most people; which is not to say that they don't want it, just that it doesn't drive their daily job performance as a positive influencer.  There are certain companies (Google in its earlier days as an excellent example) who at certain times attract people who are especially motivated by the culture, ideology, and direction of that company and money is even less significant to them so long as they have enough of it to be comfortable in their lives financially.  I'd suggest that SpaceX is a another really good example of this.  They attract the sort of passionate ideologues of the sort who would have gone to work at NASA during the space race.

So I offer you exhibit A on why a *near term* IPO might not have compensation for employees with an equity stake as a primary driver.

Perhaps even more damning is exhibit B

And for more background exhibit C and exhibit D

[QuantumG]

That's essentially true, but there's also a common belief that owning pre-IPO stock can make you rich. It's not a primary motivator, but it's something to fall back on when you start getting disillusioned at the hours you're working.

[ArbitraryConstant]

There is a difference between working crazy hours in exchange for equity and working crazy hours and receiving equity.  One implies it is a major reason for the 'working crazy hours' and the other does not.  One of the lessons in business school that kinda shocked me at the time but which now makes complete sense to me is that money is not generally a motivator for most people; which is not to say that they don't want it, just that it doesn't drive their daily job performance as a positive influencer.

I think you're looking at the wrong part of the picture. Don't ask whether you can give someone a raise to get them to work harder, ask whether you can motivate them to stay instead of leaving. There's even a pragmatic side to working on interesting challenges: career growth.

Zealotry isn't enough for retention. Without something to keep people around, all SpaceX will do is incubate a crop of supremely well qualified, hard working burnouts that will realize 2 years at SpaceX is worth more than their degree and take a job somewhere else.

[Blackjax]

There is a difference between working crazy hours in exchange for equity and working crazy hours and receiving equity.  One implies it is a major reason for the 'working crazy hours' and the other does not.  One of the lessons in business school that kinda shocked me at the time but which now makes complete sense to me is that money is not generally a motivator for most people; which is not to say that they don't want it, just that it doesn't drive their daily job performance as a positive influencer.

I think you're looking at the wrong part of the picture. Don't ask whether you can give someone a raise to get them to work harder, ask whether you can motivate them to stay instead of leaving. There's even a pragmatic side to working on interesting challenges: career growth.

Zealotry isn't enough for retention. Without something to keep people around, all SpaceX will do is incubate a crop of supremely well qualified, hard working burnouts that will realize 2 years at SpaceX is worth more than their degree and take a job somewhere else.

I suspect you didn't follow the links I posted because you seem to be advocating a similar position to what I was as though it is different.  Go watch the video I linked to as 'exhibit B'

[marsman2020]

20 years from now I don't want to be an 'Orphan of SpaceX' agonizing over the commercial space revolution that wasn't because SpaceX outpaced their resources by losing contact with their markets rather than growing them in sustainable steps.

How many F1e's (a logical upgrade of a developed, working commercial product) are available for SpaceX to fulfill their contractual obligations to launch ORBCOMMs satellites?  How many F1s are available to fulfill a launch under the NLS contract, if a payload was available?

How many F9s have been launched?  How many of those have carried payloads for commercial customers (not NASA?)

When SpaceX started out, they proclaimed an intent to follow a logical development progression based on selling launches to commercial customers.  They also said that they wanted to remain agile and unsaddled by NASA bureaucratic requirements, and independent of needing contracts from the government to survive.

Taking the COTS/CRS contracts was a nice boost for Elon's giant ego, but as far as I can tell it was totally contrary to the pre-Columbia, pre-Shuttle retirement stated objectives of the company.  Launches for commercial customers are being pushed to right in front of a snowplow full of NASA-related work.

I don't see a point in them IPOing until they start fulfilling their contractual obligations, equally to ISS and to their commercial customers.  If there is only 1 flight in 2012 I bet a lot of those commercial customers will go away.

[QuantumG]

Why in the world would you launch ORBCOMMs on a Falcon 1e? I ask because you're not the first to say it.. where are people getting this from? It's a satellite constellation.. you want to launch as many as you can as fast as you can to get to marketable services quickly. Thankfully, that's also the cheapest way to launch them.

[kevin-rf]

Why in the world would you launch ORBCOMMs on a Falcon 1e? I ask because you're not the first to say it.. where are people getting this from? It's a satellite constellation.. you want to launch as many as you can as fast as you can to get to marketable services quickly. Thankfully, that's also the cheapest way to launch them.

The disadvantage of all at once is you have to wait for all your satellites to drift to the final plane before you finalize the orbits. This can take months. In some ways it is better to launch each orbital plane on it's own rocket.

[Robotbeat]

Orbcomm launched their older constellation 8 at a time on a Pegasus, which has a lot less payload than Falcon 1e. Orbcomm is a perfect payload for Falcon 1e, but it's not enough to make continuing Falcon 1e right now a good business decision.

[kevin-rf]

Orbcomm is a perfect payload for Falcon 1e, but it's not enough to make continuing Falcon 1e right now a good business decision.

They really should manage the Falcon 1e as a spin off with a separate sales and engineering force. It really is a victim of the resources and income requirements of the larger Falcon 9 and Falcon 9 Heavy.

[kevin-rf]

I said manage it as if it was spun off, not actually spin it off.

[A_M_Swallow]

Why in the world would you launch ORBCOMMs on a Falcon 1e? I ask because you're not the first to say it.. where are people getting this from? It's a satellite constellation.. you want to launch as many as you can as fast as you can to get to marketable services quickly. Thankfully, that's also the cheapest way to launch them.

For SpaceX to launching all the satellites in one go requires a Falcon 9 with fairing.  So getting the fairing to work is be on the critical path.  However the Falcon 1e can use the Falcon 1's fairing, which has been successfully flight tested.

[Jason1701]

Why in the world would you launch ORBCOMMs on a Falcon 1e? I ask because you're not the first to say it.. where are people getting this from? It's a satellite constellation.. you want to launch as many as you can as fast as you can to get to marketable services quickly. Thankfully, that's also the cheapest way to launch them.

For SpaceX to launching all the satellites in one go requires a Falcon 9 with fairing.  So getting the fairing to work is be on the critical path.  However the Falcon 1e can use the Falcon 1's fairing, which has been successfully flight tested.

No, one of 1e's main points was a new fairing, and the 1's fairing is no longer in production. 1e will not happen.

[ArbitraryConstant]

I suspect you didn't follow the links I posted because you seem to be advocating a similar position to what I was as though it is different.  Go watch the video I linked to as 'exhibit B'

I can see why that might be a fashionable philosophy, but I don't think examples like open source software really demonstrate what they are purported to demonstrate.

Successful examples like Linux rely on on-the-clock developers at major companies like Google, IBM, Intel, Fujitsu, etc. Yes they release it for free, but the explanation from the video/your explanation is not obviously not sufficient to explain corporate participation at that level.

From Google's perspective, they want infrastructure they can support with engineers on their own payroll, and that they can use across any number of servers without licensing fees. They don't want to have to be in the OS business just to have their own OS.

For the individual, open source software is a portfolio piece, and the endgame is still career growth. In the best examples, the developer gets hired to make sure they continue to focus on their project. Successful examples find a way to bring money to the table.

The relevance to SpaceX is clear. People are willing to put in a lot of time to guide their own work, but it doesn't work at scale without an endgame where they get concrete benefits.

[cuddihy]

Lets me add my own 2 cents on this--money may not keep people working in a job they hate--it didn't keep me as a nuke--but there is much more to it than just paying someone enough so that 'money isn't an issue.'

You also have to pay enough so that people feel properly valued. SpaceX hires some of the best and most sought-after and they don't do it by showing them a promotonal video and offering a couple stock options. They do it by offering them a good amount of money appropriate to their skills and experience. These people would get paid about the same amount elsewhere.

Nobody wants to work for someone who has no clue what you're actually worth.

[go4mars]

http://www.forbes.com/sites/calebmelby/2012/03/12/how-elon-musk-became-a-billionaire-twice-over/

Comforting from a SpaceX viewpoint to know that he has that much net worth, even though almost all of it is tied up in stocks. With Tesla, he threw in all he had to make sure it didn't sink, which somewhat sets a precedent that he might be prepared to do the same for SpaceX, should the company come up against successive failures. Of course, if it came to that then it would be quite depressing.

I suspect that after the Bluestar is on production, a lot of Elon's Tesla money will start making its way into SpaceX.  May he stay healthy and well! 

The biggest wildcard component in Musk’s fortune is his two-thirds stake in SpaceX.

That's interesting.  I didn't know he had 2/3rds still.  That's good.  Means the equity slice handed out during IPO can be big enough to be useful, but small enough to leave him with 51%.  My guess:  IPO upsized to collect $600 million to $1 billion for a 15% equity stake if done after ISS resupply and good grasshopper results.  Might be even a little bigger if they really pour on the hype extra thick.   Godspeed!

I wonder how they will allocate it.

Also, I hope income from Paul Allen and operations allows the IPO to be postponed for as long as possible! 

http://nextbigfuture.com/2012/03/forbes-indicates-elon-musk-is-worth-2.html