What's the optimal timing for a SpaceX IPO?

[Jim]

Despite what Jim says, SpaceX has tremendous popular appeal (the 20,000 people trying to get into the official launch chatroom is evidence enough).

That is not evidence, those were mostly space geeks like on this forum and not Joe Public.

[Space Junkie]

SpaceX is doing just fine without public share holders.  Once you go public it opens up all sorts of worms.  Moreover, the SEC will regulate the hell out of how SpaceX runs it's business.

I am very much AGAINST an IPO for SpaceX.

I agree. Dealing with the SEC often requires even more paperwork than NASA.

[RocketEconomist327]

Despite what Jim says, SpaceX has tremendous popular appeal (the 20,000 people trying to get into the official launch chatroom is evidence enough).

That is not evidence, those were mostly space geeks like on this forum and not Joe Public.

This will change with time.  Just look at the news coverage where CNN said this was a "NASA Rocket".  SpaceX was only mentioned as an afterthought by the info-babe.

When I talk to kids about space, I always mention SpaceX, Orbital, ULA, and NASA.  Usually in that order.  I find that the kids and teenagers accept the relegation of NASA for what it is.  This next generation (if we do not bankrupt them) is going to kick a lot of... butt.

People (Joe Public) who educate themselves and want to know about the space program know SpaceX is what is truly exciting and visionary... even if it is only a 1960s/70s re-hash to industry insiders.

I am not saying it will be SpaceX (although I hope it is) if they can break the current cost of doing business in space, it will be the equivalent of the industrial revolution.  I hope you can get some stock... somehow... someway...

VR
RE327

[kraisee]

I am very much AGAINST an IPO for SpaceX.

Google arranged their IPO so that they retained control of their organization, by only issuing non-voting stock.

I see few reasons why Elon can't do exactly the same for Space-X -- if he wants to retain control.

Ross.

[simonth]

1) You don't know what the future potential space launch market will be.  You just don't.  Nobody does.

2) The Tesla IPO is relevant to SpaceX because it puts money in Musk's pocket and adds to his credibility in the venture investor community regarding scaling the finances of a capital-intensive business.  This is a successful liquidity event for all of the venture investors and a good piece of business for the investment banks.  They will want to go to this well again.

1. We can estimate what the market will be like for the car industry or the space launch industry in the next few years. What do you think all these analysts are paid for? There is no evidence at all that the space launch market will suddenly skyrocket in value anytime soon (next 10 years).

2. The Tesla IPO is not relevant to this thread. The secondary offering of shares was neglectible, in the amount of about 25 million, not all of which is going to Musk. What do you mean with "venture investor community"? The price for Tesla was determined because of strong demand by institutional investors, as well as deals with Toyota and Daimler alongside the initial public offering.

That said, I agree with you that these are separate industries with different profiles.  The auto industry is high profile and Tesla has a sexy high-profile car.  Tesla benefited from that in this IPO.

Tesla didn't "benefit" from that, that is their business case!

The launch industry on a day-to-day basis is not high profile, but at times has significant high-profile events.  For instance, Fox News may cut away to a launch.  If we start talking seriously about heavy lift and Mars, then launch could have a very high profile.

High profile events are irrelevant. It isn't the general public which a company needs to convince at an initial public offering, it is sophisticated investors, institutional investors. They are the ones with money, not some SpaceX fan who wants to invest 2k, you need to convince those investors who are willing to sign up for 2 million at an IPO or more. The general public on average contributes 10-20% to an initial public offering if it is high profile, the rest is institutional and sophisticated investors.

On the other hand, SpaceX has much less competition for its market than does Tesla.

It is the other way around at the moment. Tesla has no competition at all in what it is doing right now, there is no other available completely electrical sports car with a range of 300 miles and no car company bothers to even announce one for the next 2-3 years. There is demand here for people who buy a Tesla Roadster as a status symbol, evidenced by the fact that the average Tesla Roadster is only used very modestly on a miles per year basis (I think Tesla said 4000 miles per year as of right now).

SpaceX is in one of the most competitive industries in the world, which incidentally is also one of the smallest distinct, global industries. It is also one of the most government influenced industries with the market leaders all being government backed entities. This industry is that horrible to operate in, that if your product turns out to be less than perfect (e.g. Falcon 9 has more than 1 launch failure in the next dozen launches), commercial customers turn away from you and even the biggest customer of them all, the US government will turn away from you eventually. This is an industry with a track record of bankruptcies on the left and the right of the road and there is nothing to suggest that the industry has changed. I would be the first to cheer if it would change, because I am a spaceflight fan, but I am a realist enough to see that there is no indication whatsoever as of this time.

[jimgagnon]

Simonth is focusing on market size when considering a SpaceX IPO. It's the correct approach, as the business community is taught that a large market will offer more potential revenue and forgive many mistakes. His figures of ~$3B/year of a market size for manned launches is correct for today. Musk, with his visionary hat on, feels that's going to change. Given that the global market for space services was $261 billion in 2009, up 7 percent from 2008 and 40 percent over the last five years (source: Space Foundation), he feels that he's positioning SpaceX to ride the nice part of the hockey stick when it comes to the market for manned and unmanned LEO launches.

How you time the IPO depends upon how badly the company, your employees and seed investors need the money. From what I understand, SpaceX has plenty of money, and the Tesla IPO has taken the pressure off of Musk. If SpaceX could pull off twelve successful launches, then the market would certainly consider them a safe bet and any IPO would take off like a Falcon 9. Question is whether the seed investors are in a big enough hurry to want an earlier IPO.

[simonth]

The 2-3 billion dollars is not for manned launches, it's the current market size for comsats AND manned launch services, that is the total commercial market activity for launch services.

The total space-related market sector is something completely different. It's big and it is growing. Launch services is just the transportation, that market is very small and has peaked back in the late 1980s and early 1990s.

[jimgagnon]

The 2-3 billion dollars is not for manned launches, it's the current market size for comsats AND manned launch services, that is the total commercial market activity for launch services.

The total space-related market sector is something completely different. It's big and it is growing. Launch services is just the transportation, that market is very small and has peaked back in the late 1980s and early 1990s.

That $2-3B figure obviously doesn't include the Shuttle then. What exactly does it represent?

[Jim]

The 2-3 billion dollars is not for manned launches, it's the current market size for comsats AND manned launch services, that is the total commercial market activity for launch services.

The total space-related market sector is something completely different. It's big and it is growing. Launch services is just the transportation, that market is very small and has peaked back in the late 1980s and early 1990s.

That $2-3B figure obviously doesn't include the Shuttle then. What exactly does it represent?

ELV launches.  Shuttle is not part of the market. 

[jimgagnon]

The 2-3 billion dollars is not for manned launches, it's the current market size for comsats AND manned launch services, that is the total commercial market activity for launch services.

The total space-related market sector is something completely different. It's big and it is growing. Launch services is just the transportation, that market is very small and has peaked back in the late 1980s and early 1990s.

That $2-3B figure obviously doesn't include the Shuttle then. What exactly does it represent?

ELV launches.  Shuttle is not part of the market. 

Well, if it excludes RosCosmos and the Chinese CSNA as well as the Shuttle, then that $2-3B figure really doesn't represent annual spending on manned services.

[hop]

Well, if it excludes RosCosmos and the Chinese CSNA as well as the Shuttle, then that $2-3B figure really doesn't represent annual spending on manned services.

But it does more closely reflect the market realistically available to SpaceX.

Many payloads will continue to be tied to specific launchers for political reasons, and while SpaceX might achieve price parity with the Russians, they are unlikely to undercut them (never mind China and India) by substantial amounts.

[jimgagnon]

Well, if it excludes RosCosmos and the Chinese CSNA as well as the Shuttle, then that $2-3B figure really doesn't represent annual spending on manned services.

But it does more closely reflect the market realistically available to SpaceX.

Many payloads will continue to be tied to specific launchers for political reasons, and while SpaceX might achieve price parity with the Russians, they are unlikely to undercut them (never mind China and India) by substantial amounts.

Well, with the Shuttle gone, there will be a US demand for manned services to LEO, so those monies become available for SpaceX to chase, hence that figure is lacking in at least one respect.

As far as matching the Russian price, last numbers I heard were $50M/seat on Soyuz vs. $140M/flight of a seven seat Dragon. Assume one as pilot, one as backup and five paying passengers, that's $28M/seat. SpaceX looks competitive to me.

[nooneofconsequence]

Actually, the battle over FY2011 greatly impacts the value of an eventual Space-X IPO and how it would be presented.

Three cases: 1) no near term govt HSF 2) limited govt HSF 3) govt HSF alongside commercial. Further assume Space-X consistently succeeds and at a 4-5 per year minimum rate.

1)  They dominate the HSF category and value price based on nearest competitor's cost to compete / overtake in market. IPO sized/priced as a percentage of HSF strategic value over 10-25 years.

2) They sell a loss leader "basic service" and factor in mission options/change of scope at high rates - a kind of "cost plus". That way they are always lowest cost for any flight (for selection) and highest profit margin (for actual missions performed - you rely on there always being a "special need" underserved). IPO sized/priced like an Orbital

3)Strictly COTs and follow-on. Depends on eventual other than NASA (possibly international like ESA or JAXA) HSF demand for growth. Small IPO but highest share price ($30-45 debut). It's a bet against continuing govt spending on HSF.

Please realize that the SERVICES revenue way exceeds the vehicle revenue, and that in international deals lots of money is made with currency speculation / deal timing. Sun Microsystems often made more money this way than off server/software sales, even in some of its best years.

Pricing of IPO's depends on illogical scenarios not rational price models.

Investing is a highly emotional "gut" phenomena. For many reasons.

[Jim]

Well, if it excludes RosCosmos and the Chinese CSNA as well as the Shuttle, then that $2-3B figure really doesn't represent annual spending on manned services.

The market is not manned services.  The  $2-3B  is for unmanned spacecraft.  The only market that exists.

Spacex does not have a manned capability

[simonth]

Well, with the Shuttle gone, there will be a US demand for manned services to LEO, so those monies become available for SpaceX to chase, hence that figure is lacking in at least one respect.

The Shuttle money will not be available to commercial entities. It was tied to STS, after STS is gone, it will go away. Money will be available for crewed services, but this money will be tied to requirements. Requirements are for crew services for about 6 to the ISS per year or the equivalent of two dedicated crewed flights somewhere in 2015+. That will be 500 million maximum per year and this government money is not certain, things can change. Anyway, it is not part of the commercial market in any case.

As far as matching the Russian price, last numbers I heard were $50M/seat on Soyuz vs. $140M/flight of a seven seat Dragon. Assume one as pilot, one as backup and five paying passengers, that's $28M/seat. SpaceX looks competitive to me.

Those numbers are incorrect. 50 million per seat on Soyuz does not just include Soyuz, it includes many other services, including 6-12 months training, use of Russian facilities, the CRV function etc.

SpaceX cannot have a manned capsule flying for 140M/flight. That is the cost for unmanned services to the ISS. Manned services will cost far beyond that. In addition, if you compare Soyuz to Dragon, you need to look at the only customer relevant to both in this context - NASA. NASA has a need for a crew of 3 with 6-month rotations and a CRV role. First, will Dragon be able to fill the CRV role? All this discussion about Orion CRV suggests a no. Second, will Dragon be cheaper than Soyuz on a 3 expedition members rotation flight to the ISS? All evidence suggests no as well.

But SpaceX does not have to match Soyuz prices, what people above suggested was SpaceX has to undercut Russian commercial prices to win over payloads slated for Soyuz and Proton. This is not an easy task at all.

[mlorrey]

Well, with the Shuttle gone, there will be a US demand for manned services to LEO, so those monies become available for SpaceX to chase, hence that figure is lacking in at least one respect.

The Shuttle money will not be available to commercial entities. It was tied to STS, after STS is gone, it will go away. Money will be available for crewed services, but this money will be tied to requirements. Requirements are for crew services for about 6 to the ISS per year or the equivalent of two dedicated crewed flights somewhere in 2015+. That will be 500 million maximum per year and this government money is not certain, things can change. Anyway, it is not part of the commercial market in any case.

As far as matching the Russian price, last numbers I heard were $50M/seat on Soyuz vs. $140M/flight of a seven seat Dragon. Assume one as pilot, one as backup and five paying passengers, that's $28M/seat. SpaceX looks competitive to me.

Those numbers are incorrect. 50 million per seat on Soyuz does not just include Soyuz, it includes many other services, including 6-12 months training, use of Russian facilities, the CRV function etc.

SpaceX cannot have a manned capsule flying for 140M/flight. That is the cost for unmanned services to the ISS. Manned services will cost far beyond that. In addition, if you compare Soyuz to Dragon, you need to look at the only customer relevant to both in this context - NASA. NASA has a need for a crew of 3 with 6-month rotations and a CRV role. First, will Dragon be able to fill the CRV role? All this discussion about Orion CRV suggests a no. Second, will Dragon be cheaper than Soyuz on a 3 expedition members rotation flight to the ISS? All evidence suggests no as well.

But SpaceX does not have to match Soyuz prices, what people above suggested was SpaceX has to undercut Russian commercial prices to win over payloads slated for Soyuz and Proton. This is not an easy task at all.

Actually, Musk has already stated he'll be supplying seats for ISS crew at less than Soyuz prices, somewhere around $47 million per seat, plus cargo (given NASA wants three seats per capsule, the remaining space will be cargo), while Soyuz is now $56 million per seat. Musk has also said prices could go as low as $20 million per seat (which, given $47 million per in the three seat configuration, is consistent with $20 million per seat in the seven seat config). So, your claims that Dragon won't be cheaper are false.

Given the Dragon is both crew and cargo capable, and that while the non-dragon Falcon 9 launch price is $49 million, it is clear that the $140 million price is including all the training and capsule processing, crew handling,etc etc, I challenge you to demonstrate why SpaceX wont be able to deliver a manned launch at that price.

[hop]

Actually, Musk has already stated he'll be supplying seats for ISS crew at less than Soyuz prices, somewhere around $47 million per seat, plus cargo

And SpaceX launch prices totally matched their early estimates, right ?

Given their inexperience in building and operating spacecraft (let alone crewed spacecraft), it appears reasonable to assume Dragons price will follow a similar curve as it approaches operational status. If it does, it'll still be a bargain, but it won't be much cheaper than the Russian.

Given the Dragon is both crew and cargo capable, and that while the non-dragon Falcon 9 launch price is $49 million, it is clear that the $140 million price is including all the training and capsule processing, crew handling,etc etc

Even though they share the same basic platform, crewed and non-crewed will be different vehicles, so no, it's not at all clear. The crewed vehicle is quite a bit further from actually existing, so any estimate of it's final cost are quite uncertain. One thing we can estimate with pretty good confidence is which direction it will go if it does change.

Another thing we don't know is how much flexibility the Russians have in their prices if they are actually forced to compete. If the US gets it's own transport and CRV, the Russians will be sitting on a lot of extra capacity which has already been paid for.

[mlorrey]

Actually, Musk has already stated he'll be supplying seats for ISS crew at less than Soyuz prices, somewhere around $47 million per seat, plus cargo

And SpaceX launch prices totally matched their early estimates, right ?

Given their inexperience in building and operating spacecraft (let alone crewed spacecraft), it appears reasonable to assume Dragons price will follow a similar curve as it approaches operational status. If it does, it'll still be a bargain, but it won't be much cheaper than the Russian.

Given the Dragon is both crew and cargo capable, and that while the non-dragon Falcon 9 launch price is $49 million, it is clear that the $140 million price is including all the training and capsule processing, crew handling,etc etc

Even though they share the same basic platform, crewed and non-crewed will be different vehicles, so no, it's not at all clear. The crewed vehicle is quite a bit further from actually existing, so any estimate of it's final cost are quite uncertain. One thing we can estimate with pretty good confidence is which direction it will go if it does change.

Another thing we don't know is how much flexibility the Russians have in their prices if they are actually forced to compete. If the US gets it's own transport and CRV, the Russians will be sitting on a lot of extra capacity which has already been paid for.

One reason for the escalation in prices of Soyuz flights over the past several years has been the improving Dollar/Ruble exchange rate, as well as increases in salaries with the aerospace companies involved. Russia of today is in far different economic condition than the Russia of 1999. It is still, though, a state enterprise and, like NASA and the major contractors, burdened by a significant degree of aging workforce and retirement liabilities. This is where their cost increases will come in the future.

The primary market advantage Soyuz/Progress has is that its a proven design thats been in production a long time so the capital costs are generally minimal as there is almost no new technology development and little new tooling needs. This is where their cost savings are now.

Soyuz has limited scaling capacity specifically because of the separate crew and mission modules. You can't squeeze another person into the crew module so it will always be limited to 3 crew unless they invest in scaling it up like the Chinese did with their Shenzhou design.

Conversely, both Dragon and CST-100 have a singular large capsule and no mission module, so with all the space in the capsule can be traded off between passenger capacity and cargo capacity like a cargo airliner or military transport can. For this reason, they have a scaling advantage over Soyuz that prevents Russia from ever again offering $20 million per seat unless there is a drastic meltdown in the value of the Ruble again, but SpaceX, and possibly Boeing, if they adopt SpaceX-like practices, could potentiall offer these prices on a capsule outfitted with 7 passengers.

[simonth]

Given the Dragon is both crew and cargo capable, and that while the non-dragon Falcon 9 launch price is $49 million, it is clear that the $140 million price is including all the training and capsule processing, crew handling,etc etc, I challenge you to demonstrate why SpaceX wont be able to deliver a manned launch at that price.

Pretty easy. Look at the contract price for CRS. That's all. Anyone who asserts crewed launches (including a LAS, life support etc. etc.) will cost less or the same as a cargo flight has to come up with a very, VERY good explanation...

[jimgagnon]

Given the Dragon is both crew and cargo capable, and that while the non-dragon Falcon 9 launch price is $49 million, it is clear that the $140 million price is including all the training and capsule processing, crew handling,etc etc, I challenge you to demonstrate why SpaceX wont be able to deliver a manned launch at that price.

Pretty easy. Look at the contract price for CRS. That's all. Anyone who asserts crewed launches (including a LAS, life support etc. etc.) will cost less or the same as a cargo flight has to come up with a very, VERY good explanation...

Yup. Only prices available on SpaceX launches for now are $50M/Falcon 9 launch, and the COTS price of $1.6B for 12 cargo flights, with some sort of vague option for a total of up to $3.1B for an unknown number of additional flights. Musk did toss out that $20M/seat figure a few years ago, but that would require pretty aggressive price reductions on SpaceX's part. That will all depend on the market when any any manned capability is ready.