SpaceX fundraising again

[docmordrid]

Business Insider....

Elon Musk's SpaceX Is Raising Money At ~$10 Billion Valuation

Elon Musk's private space transportation company SpaceX is raising new funding, and TechCrunch reports that its valuation is approaching $10 billion.

The new investment is rumored to include a $200 million secondary investment, as well as further funding from California-based VC fund Draper Fisher Jurvetson. TechCrunch also claims that Blumberg Capital has been connected with the latest fundraising round.
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[Elmar Moelzer]

No, they are not raising 10 billion. They are raising between 50 and 200 million. Their evaluation (value of the company) was at 10 billion.

[docmordrid]

Yeah, retitled.

[wannamoonbase]

Raising funds to build 39A and Brownsville?

Considering how much Facebook paid for Whatsapp it's maybe the bargain of the century.  But seems like a high valuation to me.

I think for it's long term vision to be realized and not corrupted by the nature of being a publicly traded company they need to find a way to make it an employee company with a strong culture.

Need lots more revenue for that and to pay back investors first. 

It's encouraging to see that SpaceX has enough credibility to raise money to build on their foothold in the industry.

[russianhalo117]

Raising funds to build 39A and Brownsville?

Considering how much Facebook paid for Whatsapp it's maybe the bargain of the century.  But seems like a high valuation to me.

I think for it's long term vision to be realized and not corrupted by the nature of being a publicly traded company they need to find a way to make it an employee company with a strong culture.

Need lots more revenue for that and to pay back investors first. 

It's encouraging to see that SpaceX has enough credibility to raise money to build on their foothold in the industry.

well for starters, they have already started on SLC-39A; they have done nothing in Texas other than conduct surveying and begin the cleanup of the site ahead of clearing and leveling.
Now continue discussion.

[JasonAW3]

$200 Million to build both a Spaceport and rebuild pad 39A?

     Assuming that they're going to add to the Infrastructure of the area, probably rent out launch and landing facilities to a number of other companies, and prep 39A to be used, not just by themselves but other companies too?

I think it's a bargin!  After the first few rocket launches by other companies, the Brownsville investment will have paid for itself.  The 39A modifications and letting other companies use it as well, that equates to corporate good will that could help all sides.  Can you imagine a new rocket based on teh Delta or Atlas using Merlin or Raptor engines? (Yeah, different fuels but it IS possible and shouldn't take too much modification of the stages themselves, although the plumbing is gonna need some work).

[QuantumG]

Must be nice to have a $10B valuation on ~$50M/year in sales (most of which is bookings - which in any other industry would count for $0.) I suppose it's closer to $300M/year if you include NASA, but that's not scalable business.

[Joey S-IVB]

Must be nice to have a $10B valuation on ~$50M/year in sales (most of which is bookings - which in any other industry would count for $0.) I suppose it's closer to $300M/year if you include NASA, but that's not scalable business.

They make $57 million in sales for each flight. If you mean profit, we don't know how much SpaceX is making per flight. From what I can tell, we also don't know how much they make from their CRS contract with NASA. So their revenues are well over $400 million a year, but the profit numbers, as far as I know, have not been released.

[QuantumG]

They make $57 million in sales for each flight.

They haven't sold a single launch for that price, yet.

As I said, CRS doesn't count for an evaluation - it doesn't scale.

[Lar]

Here's another take on the base story from TechCrunch.

http://techcrunch.com/2014/08/19/spacex/

Me, I am surprised they are raising money at all. Had thought they were past that. Maybe this round is another "establish value" round? 200M can do a lot if it is spent prudently.

[MP99]

They make $57 million in sales for each flight.

They haven't sold a single launch for that price, yet.

As I said, CRS doesn't count for an evaluation - it doesn't scale.

I'd understand that none of the launches to date were negotiated at this price.

How sure can you be that none of the recent signings were at/near list price?

Cheers, Martin

[dcporter]

@Lar I'm surprised too. 200M at a 10B valuation means they're selling off 2% of the company, right? You can only do that so many times.

[cro-magnon gramps]

@Lar I'm surprised too. 200M at a 10B valuation means they're selling off 2% of the company, right? You can only do that so many times.

depends on the contractual details... it could be just a straight forward loan investment, with capital + interest over time returned... or it could as you say, be a stake in the business at 2%, with no controlling vote... we won't probably ever know...

btw I am not even an amateur in this, so will leave it up to the beancounters to figure it out...

[QuantumG]

I'd understand that none of the launches to date were negotiated at this price.

How sure can you be that none of the recent signings were at/near list price?

Bookings don't count for valuations either. Didn't I say that? Yup, I did.

[meekGee]

They make $57 million in sales for each flight.

They haven't sold a single launch for that price, yet.

As I said, CRS doesn't count for an evaluation - it doesn't scale.

Hey, you can't have both sides of the argument....

If you're arguing that NASA doesn't count since it is not scalable (and I agree) then you have to valuate them based on their projected steady state revenue (or profit) - and so any one-time discounts they gave for the first flights of F9 1.1 do not count either.

They have flight-rate projections based on talks with customers that we're not privy to.  They have their costs estimates which we don't know.  Some of this information is available to investors under NDA, I suppose.

Plus, they have far-reaching plans for an incredibly large pay-off.  In and of itself, that's not enough to support a general valuation, but when you have a near-term business like they do, it definitely adds.

 

[QuantumG]

Yeah, if you're trying to value a company you look at actual revenue, not promises of customers (bookings) or one-off deals that they have no hope of repeating. So far, SpaceX hasn't had any reliable revenue, and that's probably why they're off raising money again.

[wolfpack]

Company valuations are price-to-sales ratio (PS) or price-to-earnings ratio (PE). PS ~ 5, PE ~ 15 are healthy numbers. It's easy with public companies, less so with private ones. I don't understand a $10B valuation.

[meekGee]

Yeah, if you're trying to value a company you look at actual revenue, not promises of customers (bookings) or one-off deals that they have no hope of repeating. So far, SpaceX hasn't had any reliable revenue, and that's probably why they're off raising money again.

That's not true.  You always look to the future, unless you're trying to valuate a steady-state company like Coca-Cola.

Opinions about the future vary.  And so do valuations.   But you have to be consistent in your methodology.

SpaceX's brief history makes future projections less certain, but that's why not everyone invests.  This is where judgement comes in.

A simple multiplier on annual revenue or profit only makes sense for steady-state companies.

If you think they'll be worth significantly more than $10B within a few years, you should jump in if you can.

Edit/Lar: I'm a stickler for brand names Besides it bugs meekGee when I edit him

[QuantumG]

A simple multiplier on annual revenue or profit only makes sense for steady-state companies.

If you think they'll be worth significantly more than $10B within a few years, you should jump in if you can.

This is once again people insisting that a 10 year old company should be treated as a startup. That's a fool's game.

[JBF]

Are we sure this isn't just another employee stock sale?

[yg1968]

Yeah, if you're trying to value a company you look at actual revenue, not promises of customers (bookings) or one-off deals that they have no hope of repeating. So far, SpaceX hasn't had any reliable revenue, and that's probably why they're off raising money again.

They are more than just bookings. They are contracts. Furthermore, SpaceX probably gets paid on a percentage of completion method (or something similar).

[QuantumG]

Yeah, if you're trying to value a company you look at actual revenue, not promises of customers (bookings) or one-off deals that they have no hope of repeating. So far, SpaceX hasn't had any reliable revenue, and that's probably why they're off raising money again.

They are more than just bookings. They are contracts. Furthermore, SpaceX probably gets paid on a percentage of completion method (or something similar).

A rational investor would call them bookings. There's no recognizable timeline for receiving the full account and perpetual slips are the norm.

[abaddon]

They make $57 million in sales for each flight.

They haven't sold a single launch for that price, yet.

Technically no, but it's getting awfully close:

Sat ops Econ 101 re: SpaceX. AsiaSat 8 launch cost AsiaSat $52.2M. Same sat on ILS Proton: $107M. Even w/ delays, the calculus is simple.

https://twitter.com/pbdes/status/496640752215023616

[QuantumG]

Technically no, but it's getting awfully close

Fair enough. I'd even say that's reasonable to count. So you're talking a ~$500M valuation.. maybe even ~$1B if you squint.. but not $10B. Maybe in a few years time, if they focus on sales and don't go off on another retooling adventure, but not now.

[wannamoonbase]

...but the profit numbers, as far as I know, have not been released.

That's because there is no profit.

There is no way that SpaceX is profitable on anything at this point.  Need more launches, not at discount for that to happen.

Edit: But I do think that SpaceX is a great example of the commercial initiative by NASA working.  The NASA contracts are obviously the money that has driven much of SpaceX's development.  They have leveraged a few hundred million to produce a viable company for a fraction of the cost of doing it themselves.  There is a now a company worth $10B and NASA has put out less than $1B to this point. 

[kirghizstan]

...but the profit numbers, as far as I know, have not been released.

That's because there is no profit.

There is no way that SpaceX is profitable on anything at this point.  Need more launches, not at discount for that to happen.

There is no way to know that unless you are on the inside

[QuantumG]

...but the profit numbers, as far as I know, have not been released.

That's because there is no profit.

There is no way that SpaceX is profitable on anything at this point.  Need more launches, not at discount for that to happen.

There is no way to know that unless you are on the inside

It's pretty obvious they're living off CRS and CCDev funding. Hopefully they're not too dependent upon deposits.

[TrevorMonty]

Not unexpected given their low launch rate todate, 2015 should put them in the black.

[RocketGoBoom]

Must be nice to have a $10B valuation on ~$50M/year in sales (most of which is bookings - which in any other industry would count for $0.)

I can assure you that valuation is taking into consideration the manifest that is signed to launch with SpaceX. That is forward looking revenue which is very common, both in mature companies and with startups. Everything is based on 5 year projections for what the company  has planned.

For you to claim that their bookings / manifest counts for $0 is just silly.

[RocketGoBoom]

@Lar I'm surprised too. 200M at a 10B valuation means they're selling off 2% of the company, right? You can only do that so many times.

That is actually very small in terms of percentage. Very often a Series A or Series B round of funding can be for 25% to 50% of the company's valuation. It is really based on the position of strength or weakness of the company versus the new investors that want in.

A company in distress will have to give up a larger percentage of the total ownership to raise their targeted amount of money.

A strong company, where investors are banging down the door to get a piece of the action, will only have to give a very small percentage at a higher valuation.

Clearly SpaceX is in a strong position if they can raise money at a $10 billion valuation. The last time they raised money and numbers were in the media, it was mentioned at a $4 billion valuation.

The difference between then (it was early 2013 I think) and now is that SpaceX has had multiple successful launches to GTO for commercial customers. So now investors can make a lot more forward looking estimates about where the commercial launch market is going. And investors are betting that SpaceX is going to capture a large percentage of the business out there.

I think new investors are also betting that within 5 years SpaceX will also capture some piece of the pie from the DOD launches that ULA currently has. 30% of that DOD launch market is likely a reasonable estimate for investors to pencil into their valuation model.

As for margins and profits, we won't know that data until SpaceX files an S-1 with the SEC in preparation for going public. And that won't happen anytime soon. But SpaceX likely is disclosing that data to the new investors for this private offering. Those investors are sophisticated and know what to look for. If they saw something on the verge of failure, they wouldn't be investing at a $10 billion valuation.

[Coastal Ron]

A simple multiplier on annual revenue or profit only makes sense for steady-state companies.

If you think they'll be worth significantly more than $10B within a few years, you should jump in if you can.

This is once again people insisting that a 10 year old company should be treated as a startup. That's a fool's game.

I like Steve Blank's definition of a startup:

"A startup is a temporary organization searching for a repeatable and scalable business model."

There is no time scale associated with that, and I would argue that once a startup has found it's first "repeatable and scaleable business model" that they are no longer a startup but a sustaining business that is trying to expand.

So, has SpaceX found a successful "repeatable and scalable business model"?

[Coastal Ron]

Must be nice to have a $10B valuation on ~$50M/year in sales (most of which is bookings - which in any other industry would count for $0.) I suppose it's closer to $300M/year if you include NASA, but that's not scalable business.

Investors are looking for a company to invest in where they can get at least a 10X ROI within 5-10 years.  You can rarely do that in a 5-10 year period with a company that has already become a mature business, so of course you have to assume some risk on companies that have not started generating revenue (or not much).  Which is why investors bet on the POTENTIAL for revenue.

And of course the potential investors have a view into the potential business that we on the outside don't, so basing investment decisions on what we can see publicly today is like not leading your target when skeet shooting - you'll always be behind.

[Ludus]

Are we sure this isn't just another employee stock sale?

That 's exactly what it is. Another liquidity round. They try to do this about twice a year for employees and minority investors (Musk controls a majority).

[TrevorMonty]

Does somebody know how much of the launch fees are paid in advanced and how much after the launch?

[dcporter]

Does somebody know how much of the launch fees are paid in advanced and how much after the launch?

My recollection from reading it in passing on this forum several years ago is that fees are paid on milestones, with nearly the entire fee paid by the time the rocket launches.

[RocketGoBoom]

Are we sure this isn't just another employee stock sale?

That 's exactly what it is. Another liquidity round. They try to do this about twice a year for employees and minority investors (Musk controls a majority).

Since Elon has not sold any Tesla or Solar City stock ever .... I wonder how he funds his billionaire lifestyle. It takes a few hundred million dollars to fund his personal lifestyle with the private jet, the $17 million mansion, etc. His official income from Tesla is something like $40,000 per year. He doesn't have any listed income as Chairman of SolarCity.

Per reports, he invested just about every remaining Paypal fortune dollar he had in Tesla and SpaceX back during the financial crisis in 2008-2009.

Elon has a lot more flexibility with SpaceX because it is private. I think past reports have placed his ownership stake at above 60% of the company. So perhaps he has also been liquidating a small percentage of his stock in SpaceX to fund his lifestyle. Probably not a huge amount, but it wouldn't surprise me if he has cashed out $100 million or more in recent years.

[PreferToLurk]

Are we sure this isn't just another employee stock sale?

That 's exactly what it is. Another liquidity round. They try to do this about twice a year for employees and minority investors (Musk controls a majority).

Since Elon has not sold any Tesla or Solar City stock ever .... I wonder how he funds his billionaire lifestyle. It takes a few hundred million dollars to fund his personal lifestyle with the private jet, the $17 million mansion, etc. His official income from Tesla is something like $40,000 per year. He doesn't have any listed income as Chairman of SolarCity.

Per reports, he invested just about every remaining Paypal fortune dollar he had in Tesla and SpaceX back during the financial crisis in 2008-2009.

Elon has a lot more flexibility with SpaceX because it is private. I think past reports have placed his ownership stake at above 60% of the company. So perhaps he has also been liquidating a small percentage of his stock in SpaceX to fund his lifestyle. Probably not a huge amount, but it wouldn't surprise me if he has cashed out $100 million or more in recent years.

Wildly off Topic, so I half expect this post to go poof, but...

Private Jet not likely to be owned by Musk personally, but one of his companies. His car is likely free. He also likely takes a salary from SpaceX.  You would be surprised how little income someone with that high of a net worth really needs.  His mortage for instance is likely around 1%.  (I read somewhere that Mark Zukerberg's personal mortage rate was less than 1%).  So while he might be cashing in a little in the employee liquidation rounds he has with SpaceX, I would bet that it isn't very much. 

There is a reason the rich tend to get richer, and one of them is that the rich can actually live very cheaply.

[Lar]

No more on Musk lifestyle or PreferToLurk gets axed too. Er, I mean his post does.

[Coastal Ron]

Are we sure this isn't just another employee stock sale?

That 's exactly what it is. Another liquidity round. They try to do this about twice a year for employees and minority investors (Musk controls a majority).

They have only done one liquidity round, or at least only one that Crunchbase knows about (the go-to source for tracking investments in the tech community).

As to $200M, that is too large for a liquidity round, so it is likely to be for capital projects such as the now-approved Texas launch site, reusability of the Falcon 9/H, and whatever the Raptor will be attached to.

Just as a general observation, investments usually are in the works for months since a lot of the time is taken in coming up with the valuation number.  It could have also been that they have been waiting for a trigger event, like the approval of the Texas launch site, in order to proceed since the valuation would be predicated on whatever the trigger event was and whether the proffered future still looks as rosy as management has suggested it would be.

Something else to watch on this is how much of it is follow-on investment from existing investors.  That's a pretty common occurrence in Silicon Valley today, and in fact the trend has been to "double-down" on existing investments instead of spreading their money across many investments.  For small, emerging companies that has created an investment crunch of sorts, but for SpaceX they are in the sweet spot (i.e. market validation, revenue and no near-term competitors).

[TrevorMonty]

With nearly 20 launches on manifest between now and end of 2015, cash flow shouldn't be an issue from now on. That is assuming they can duplicate the last launch. There is also another possible revenue stream, every recovered booster is a $20-30m bonus. Assuming a 50% recovery rate that is $200-300m bonus.

[QuantumG]

With nearly 20 launches on manifest between now and end of 2015, cash flow shouldn't be an issue from now on. That is assuming they can duplicate the last launch.

Even assuming that, the customers have gotta be ready to fly. They don't pay up until they deliver their payload.

[Lars_J]

With nearly 20 launches on manifest between now and end of 2015, cash flow shouldn't be an issue from now on. That is assuming they can duplicate the last launch.

Even assuming that, the customers have gotta be ready to fly. They don't pay up until they deliver their payload.

This has been pointed out to you many times, so you should know you are wrong on this. Contracts usually have deposits and multiple payments based on negotiated milestones.

[QuantumG]

This has been pointed out to you many times, so you should know you are wrong on this. Contracts usually have deposits and multiple payments based on negotiated milestones.

Huh? With SpaceX they have a deposit and a final payment. I know this for a fact. If you feel like correcting me, please have your SpaceX guy talk to my SpaceX guy.

* For all the commercial customers so far, anyway. May not be the case in the future, certainly hasn't been the case for NASA.

[Lars_J]

This has been pointed out to you many times, so you should know you are wrong on this. Contracts usually have deposits and multiple payments based on negotiated milestones.

Huh? With SpaceX they have a deposit and a final payment. I know this for a fact. If you feel like correcting me, please have your SpaceX guy talk to my SpaceX guy.

Then we are in agreement. Your statement seemed to imply to me that there was no payment (not even a deposit) until the payload was delivered. My misunderstanding.

[TrevorMonty]

Any idea what final payment is as a percentage.

[Prober]

With nearly 20 launches on manifest between now and end of 2015, cash flow shouldn't be an issue from now on. That is assuming they can duplicate the last launch.

Even assuming that, the customers have gotta be ready to fly. They don't pay up until they deliver their payload.

unless they are NASA.   Remember the claim from that deleted Forbes?

[symbios]

With this official round off investments the sheres have now officialy gone up with 250 % from the last round of investements according to this post (4-10 billion).

This means for all previous investors that they can book this change and possibly sell or take loans on their shares new value.

[AncientU]

Yeah, if you're trying to value a company you look at actual revenue, not promises of customers (bookings) or one-off deals that they have no hope of repeating. So far, SpaceX hasn't had any reliable revenue, and that's probably why they're off raising money again.

Why is the NASA/CRS deal one-off?  CRS-2 is coming as is CCtCAP. NASA science payloads are on the horizon. Other NASA launch/transportation services are possible down the road (BFR, depots, landers, etc.).
What is the distinction between these space transportation business opportunities and commercial launches that make them one-off and no hope of repeating?

[Ludus]

Are we sure this isn't just another employee stock sale?

That 's exactly what it is. Another liquidity round. They try to do this about twice a year for employees and minority investors (Musk controls a majority).

They have only done one liquidity round, or at least only one that Crunchbase knows about (the go-to source for tracking investments in the tech community).

As to $200M, that is too large for a liquidity round, so it is likely to be for capital projects such as the now-approved Texas launch site, reusability of the Falcon 9/H, and whatever the Raptor will be attached to.

Just as a general observation, investments usually are in the works for months since a lot of the time is taken in coming up with the valuation number.  It could have also been that they have been waiting for a trigger event, like the approval of the Texas launch site, in order to proceed since the valuation would be predicated on whatever the trigger event was and whether the proffered future still looks as rosy as management has suggested it would be.

Something else to watch on this is how much of it is follow-on investment from existing investors.  That's a pretty common occurrence in Silicon Valley today, and in fact the trend has been to "double-down" on existing investments instead of spreading their money across many investments.  For small, emerging companies that has created an investment crunch of sorts, but for SpaceX they are in the sweet spot (i.e. market validation, revenue and no near-term competitors).

http://pando.com/2013/03/20/dfj-led-a-30m-shareholder-liquidity-round-that-valued-space-x-between-4-5-billion/

Here's a reference to more. IIRC Musk or SpaceX has commented about the frequency. Some regularity was necessary once an IPO was off the table.

It is certainly possible that SpaceX itself is selling stock as part of it, which would take it beyond liquidity to raising capital. Since they are a private company it's hard to say. Whether the 50-200M range itself is too high for it is also hard to say. As someone commented, Musk could sell off stock in that range for personal purposes without substantially changing his control.

[QuantumG]

Why is the NASA/CRS deal one-off?  CRS-2 is coming as is CCtCAP. NASA science payloads are on the horizon.

A valuation is about growth. It's about the multiplier of investment to return. It's about saying "if you had X more money, what would you do to produce Y more return". It's really hard to make the argument that SpaceX could get more government business if only they had more production capability. Whereas commercial customers are lining up for it - if SpaceX can finally demonstrate they can deliver.

[Robotbeat]

Why is the NASA/CRS deal one-off?  CRS-2 is coming as is CCtCAP. NASA science payloads are on the horizon.

A valuation is about growth. It's about the multiplier of investment to return. It's about saying "if you had X more money, what would you do to produce Y more return". It's really hard to make the argument that SpaceX could get more government business if only they had more production capability. Whereas commercial customers are lining up for it - if SpaceX can finally demonstrate they can deliver.

Dont agree. They could take nearly all of ULA's business if Falcon Heavy was flying inexpensively and reliably and routinely from both coasts. That's a couple billion dollars of revenue, roughly. On top of ISS crew, cargo, and all the comm sat launches. And with high reusability it could be fairly high margin, potentially.

Plus Raptor and BFR really could compete for SLS money longer term.

[Scylla]

Updated: SpaceX denies report it is raising massive funding round, valued at $10B
http://gigaom.com/2014/08/19/spacex-reportedly-raising-massive-funding-round-valued-at-10b/

“SpaceX is not currently raising any funding nor has any external valuation of that magnitude or higher been done,” SpaceX communications director John Taylor wrote in an email to Gigaom. “The source in this report is mistaken.”

[WindyCity]

I wonder how he funds his billionaire lifestyle. It takes a few hundred million dollars to fund his personal lifestyle with the private jet, the $17 million mansion, etc. His official income from Tesla is something like $40,000 per year. He doesn't have any listed income as Chairman of SolarCity.

I would describe it more as a movie star's lifestyle, except that he works a lot harder, and the companies probably pay for a big chunk of the cost of the jet. I don't know how many billionaires work at two extraordinarily stressful jobs over seventy hours a week, buzzing back and forth between LA and San Francisco, and spend most of their "spare" time raising a household of boys. If that's living on easy street, many of us might prefer a modest pension and a cozy cabin on the shores of Walden Pond.

[deruch]

With nearly 20 launches on manifest between now and end of 2015, cash flow shouldn't be an issue from now on. That is assuming they can duplicate the last launch. There is also another possible revenue stream, every recovered booster is a $20-30m bonus. Assuming a 50% recovery rate that is $200-300m bonus.

Are they selling the recovered boosters for scrap metal?  Just recovering them doesn't earn SpaceX much of anything.  In fact, there will be increased costs (storage, disassembly, testing, analysis, changes to production methods, etc.).  It's not until they can launch on a reused booster that there's any possibility of cutting their costs.  Even with recovery guaranteed, easy non-refurbished reuse isn't a given.  There's certainly a potential for their future launch costs to come down some, though.  But I wouldn't look for those savings for quite a while yet.

[ncb1397]

ULA is worth 7.5 billion with a 15x multiplier on their 500 million annual profit. If someone is betting that SpaceX is going to be ULA but with commercial customers and minimal costs due to re-usability, I can see the 10 billion dollar valuation.

[Norm38]

So, has SpaceX found a successful "repeatable and scalable business model"?

When they re-fly a first stage they will. A lot of that $10 Billion must be counting on reuse panning out.

[meekGee]

Why is the NASA/CRS deal one-off?  CRS-2 is coming as is CCtCAP. NASA science payloads are on the horizon.

A valuation is about growth. It's about the multiplier of investment to return. It's about saying "if you had X more money, what would you do to produce Y more return". It's really hard to make the argument that SpaceX could get more government business if only they had more production capability. Whereas commercial customers are lining up for it - if SpaceX can finally demonstrate they can deliver.

So we seem to have a the following situation:

A number of rather successful investors think one thing, and QG thinks another.

There are three explanations:
A) QG is correct about the investors being irrational with their money by a good order of magnitude, or
B) The model for valuation used by the investors is more forward looking than QG's, or
C) The investors have been given some information by SpaceX that makes then subscribe to the $10B valuation.

Shall we start a poll?

[Scylla]

Unfortunately for the discussion on this thread, there appears to have been an oopsy on the reported fund raising and 10 billion valuation.

I refer you to my post up thread-#51.

[meekGee]

Unfortunately for the discussion on this thread, there appears to have been an oopsy on the reported fund raising and 10 billion valuation.

I refer you to my post up thread-#51.

Party spoiler!

And add option D to my list above:
D) This has all been a dream

[TrevorMonty]

Video from Smallsat conference 2014 of  Steve Jurvetson talk on SpaceX and its original financing. This presentation was where the video of 1 stage landing was first shown.

[CuddlyRocket]

Since Elon has not sold any Tesla or Solar City stock ever .... I wonder how he funds his billionaire lifestyle. It takes a few hundred million dollars to fund his personal lifestyle with the private jet, the $17 million mansion, etc. His official income from Tesla is something like $40,000 per year. He doesn't have any listed income as Chairman of SolarCity.

He borrows money from a bank or other financial institution secured on his shareholdings in Tesla, SolarCity, SpaceX and other investments he has. The interest is rolled over, but the value of his shares are increasing much faster than this so the debt as a percentage of his assets is declining rapidly. He's supposedly worth over $10 billion, so even $300 million to fund his personal lifestyle is only 3%!

Valuations of companies can be carried out using a number of different metrics. Which one is most appropriate is a matter of judgement about which even financial experts can disagree (it takes two to make a market, as the old adage goes). It certainly is not limited to considerations of a multiple of present revenue, as a quick glance at published research by major financial institutions on Tesla will demonstrate; most of the recent ones are based on anticipated revenue once planned new models are in production. Research drugs companies are another example; valuations are based on anticipated revenue if the candidate drug works, less a discount because most of them don't!

SpaceX's aim is to develop the transportation infrastructure to enable a Mars colony; and it no doubt can be used for other purposes. Should they succeed revenue is likely to be considerable. Opinions differ on the likelihood!

[dkovacic]

Must be nice to have a $10B valuation on ~$50M/year in sales (most of which is bookings - which in any other industry would count for $0.) I suppose it's closer to $300M/year if you include NASA, but that's not scalable business.

Estimate for 2014:
 - 2-3 CRS missions (266-399 mil)
 - CCiCAP funding (200 mil, I estimated 45%)
 - 2 Asiasat missions (2x52,5=105 mil)
 - Thaicom mission (52,5 mil?)
 - 1-2 Orbcomm missions (11-22 mil)
 - Turkmensat mission? (52,5 mill)

So 2014 estimate is between 634 and 831 million.

2015 estimate:
 - 2-3 CRS missions (399 mil)
 - CCiCAP and CCtCAP funding (100-200 mil)
 - 4-5 commerical missions (5x56 mil = 280 mil)
 - 1-2 USG missions (Jason-3, STP-2) - 180 mil

So 2015 estimate would be between 780 and 1059 million.

Conservative 5 year outlook (2019):
 - 3 CRS2 missions (399 mil)
 - 2 USCV missions (280 mil)
 -10 commercial GTO missions (560 mil)
 - 5 EELV missions (500 mil)
 - 3 other USG missions (300 mil)

That is over $2 billion in revenue, without any new markets (such as large LEO constellations, Private space stations, orbital tourism etc.), and price reductions. And the market capture is conservative 50% of each segment (ISS, commercial GTO, EELV). And no new development programs (such as COTS or Commercial Crew).

Note that just big three in commercial communications space (SES, Intelsat, Eutelsat) need to launch 10 satellites per year just for replacement of the existing fleet.

Optimistic 5 year outlook (2019), with reduced F9R price to 40 million per launch (33%):

 - 3 CRS2 missions (360 mil)
 - 4 USCV missions (480 mil)
 -15 commercial GTO missions (600 mil)
 - 8 EELV missions (640 mil)
 - 3 other USG missions (240 mil)
 - 5 commercial LEO missions (200 mil)
 - 2 Private spaceflight missions (160 mil)
 - Future NASA development program (200 mil)

That is $2.88 billion. With 40 missions per year. And the outlook to grow the private spaceflight segment by a significant factor. Of course there are risks, but so is in any business. I would even say that many "normal" companies take greater risks than SpaceX does.

[Scylla]

Unfortunately for the discussion on this thread, there appears to have been an oopsy on the reported fund raising and 10 billion valuation.

I refer you to my post up thread-#51.

Party spoiler!

And add option D to my list above:
D) This has all been a dream

Just doing my part to insure your proposed poll had all the pertinent options.

[QuantumG]

Why is the NASA/CRS deal one-off?  CRS-2 is coming as is CCtCAP. NASA science payloads are on the horizon.

A valuation is about growth. It's about the multiplier of investment to return. It's about saying "if you had X more money, what would you do to produce Y more return". It's really hard to make the argument that SpaceX could get more government business if only they had more production capability. Whereas commercial customers are lining up for it - if SpaceX can finally demonstrate they can deliver.

So we seem to have a the following situation:

A number of rather successful investors think one thing, and QG thinks another.

There are three explanations:
A) QG is correct about the investors being irrational with their money by a good order of magnitude, or
B) The model for valuation used by the investors is more forward looking than QG's, or
C) The investors have been given some information by SpaceX that makes then subscribe to the $10B valuation.

Shall we start a poll?

Ha! Turns out I was right and all your imaginary investors were wrong. Who would have guessed!

[dcporter]

Ha! Turns out I was right and all your imaginary investors were wrong. Who would have guessed!

You get big points for "A SpaceX valuation of $10B seems wrong enough to me that I bet it's wrong" but I don't think anybody is going to give you "No company is ever valued based on signed contracts and expectation of future revenue".

[QuantumG]

Ha! Turns out I was right and all your imaginary investors were wrong. Who would have guessed!

You get big points for "A SpaceX valuation of $10B seems wrong enough to me that I bet it's wrong" but I don't think anybody is going to give you "No company is ever valued based on signed contracts and expectation of future revenue".

I never said that. There are companies that get valuations like that.. they're called startups.

[dcporter]

I never said that. There are companies that get valuations like that.. they're called startups.

Well I'll take my licks for exaggerating for effect, but:

Must be nice to have a $10B valuation on ~$50M/year in sales (most of which is bookings - which in any other industry would count for $0.) I suppose it's closer to $300M/year if you include NASA, but that's not scalable business.

Bookings don't count for valuations either. Didn't I say that? Yup, I did.

You did lead without any caveats, and you used pretty broad language.

A simple multiplier on annual revenue or profit only makes sense for steady-state companies.

If you think they'll be worth significantly more than $10B within a few years, you should jump in if you can.

This is once again people insisting that a 10 year old company should be treated as a startup. That's a fool's game.

So I gather you were basically implying this the whole time – fair enough. Are you saying that only startups should ever be judged based on near- and medium-term expected revenue?

If so I can rephrase my original post: I don't think anybody is going to give you "Only brand new companies should ever be valued based on signed contracts and expectation of future revenue". Why shouldn't any company with great expectations over and above their historic and current revenues be valued based on them? You can dismiss anything beyond a P/E ratio as emotional investing, but if you as an investor have seen enough to suggest that the P/E severely undervalues the company in the medium term, you'd be missing an opportunity to walk away.

[QuantumG]

Because when you bet on a company delivering in a way they've never successfully delivered before you're no longer investing, you're gambling. SpaceX is on their own until they prove out their magical business model that somehow makes money from charging people less, while plowing money into R&D and an ever increasing headcount. When they have the numbers to back up their brave claims we'll see them expand rapidly and revolutionize the industry.. but it hasn't happened yet, so a valuation that high would be wrong. That's what a valuation is - a sober analysis of how much the business is worth if they do what they've been doing. I'm hopeful they'll pull it off, but I'd be suing my 401k if they invested at this point in time.

[dcporter]

A valuation is a sober analysis of how much the business is worth, full stop. If SpaceX is confident in its future earnings curve, it would be very remiss to sell off bits of itself at its current "sober" valuation.

All investing is gambling – your analysis assumes the continuity of the status quo, which is as much of a gamble as soberly assuming change. Things don't ever stay exactly the same.

I WILL GRANT that it's possible to hide a lot of hocus pokery under "but things will change", and not possible to hide much in "look only at history". There is a great deal of value there. But it's narrow thinking to say that the only sober way to value a company older than n years is to look at existing actualized revenue.

a valuation that high

Agreed by the way that $10B seemed pretty bonkers, and again kudos for calling it out. We're not arguing about your conclusion but some specifics.

[Oli]

Investors are interested in future profit not revenue.

Either way, we're witnessing another period of 'irrational exuberance'.

[Coastal Ron]

Because when you bet on a company delivering in a way they've never successfully delivered before you're no longer investing, you're gambling.

I disagree.

Venture capital investment, which is the kind that was erroneously reported SpaceX was seeking another round of investment from, is about risk.  You can't make a 10X ROI without assuming a lot of risk, and if you look at some the deals VC's have done you'll see lots of money going into companies that have yet to prove out their business models.

SpaceX is on their own until they prove out their magical business model that somehow makes money from charging people less, while plowing money into R&D and an ever increasing headcount.

I don't understand what you mean by "on their own", because every time a company orders a launch from SpaceX they are joining SpaceX in their "magical business model" - they believe enough in it to risk their own money.  They are investing in SpaceX.

I'm hopeful they'll pull it off, but I'd be suing my 401k if they invested at this point in time.

If you want zero risk investments then put your bury your money in a secret place in your yard.  Because the only way your 401K makes money is by taking risks, both small and big.

[ncb1397]

Because when you bet on a company delivering in a way they've never successfully delivered before you're no longer investing, you're gambling. SpaceX is on their own until they prove out their magical business model that somehow makes money from charging people less, while plowing money into R&D and an ever increasing headcount. When they have the numbers to back up their brave claims we'll see them expand rapidly and revolutionize the industry.. but it hasn't happened yet, so a valuation that high would be wrong. That's what a valuation is - a sober analysis of how much the business is worth if they do what they've been doing. I'm hopeful they'll pull it off, but I'd be suing my 401k if they invested at this point in time.

You don't understand how Elon Musk works. Tesla never has really made a dime(or planned to make a dime) off anything they have sold but is worth 30 billion now and was worth 5 billion not that long ago. Given their non-profit driven business model and plan to charge less for electric cars in the future, you would have sued your 401k for buying Tesla at a 5 billion dollar valuation effectively making you a much wealthier person? You don't need a profit driven business model to have a company's value and your portfolio float. Amazon is trading at 880 P/E but is trading profits now to sustain its impressive revenue growth. Their investors are doing fine, despite their attempt to charge customers less. I doubt that any company Elon Musk is involved with will ever make any sort of big profits anytime soon if ever, but will simply dominate through plowing everything back into expanding the business while other companies take their money and a.)let it sit there or b.)give it to owners to blow on <insert vice>. An example of this is Tesla's recent expansion of drivetrain warranty to 8 years for future and former buyers. Tesla could have taken that money and paid dividends or something, but instead they are building a customer base and building a larger piece of the market for the type of cars that they sell. Given that the industries he is in: energy, transporation and aerospace are simply enormous in scope and have room to grow, there is a long way to go before the natural limit to expansion is reached even at double digit growth rates.

[Lar]

I think we are probably done with the "I know more about investing than you do" posts, right? They certainly had a lot of snark.

Is there more to say on other things? Feels like done overall if in fact this 10B valuation was based on a thing that didn't happen, no?

[corneliussulla]

Because when you bet on a company delivering in a way they've never successfully delivered before you're no longer investing, you're gambling. SpaceX is on their own until they prove out their magical business model that somehow makes money from charging people less, while plowing money into R&D and an ever increasing headcount. When they have the numbers to back up their brave claims we'll see them expand rapidly and revolutionize the industry.. but it hasn't happened yet, so a valuation that high would be wrong. That's what a valuation is - a sober analysis of how much the business is worth if they do what they've been doing. I'm hopeful they'll pull it off, but I'd be suing my 401k if they invested at this point in time.

I think you just described intel, and to many other tech names to mention business model. Charging people less for more is a well established business model i think

[QuantumG]

I think we are probably done with the "I know more about investing than you do" posts, right? They certainly had a lot of snark.

Is there more to say on other things? Feels like done overall if in fact this 10B valuation was based on a thing that didn't happen, no?

I don't think it's unreasonable to talk about the topic of the thread.

Of course, if ya wanna lock this now, it'd be a good idea because the topic of the thread turned out to be completely false.

[Lar]

I think we are probably done with the "I know more about investing than you do" posts, right? They certainly had a lot of snark.

Is there more to say on other things? Feels like done overall if in fact this 10B valuation was based on a thing that didn't happen, no?

I don't think it's unreasonable to talk about the topic of the thread.

Of course, if ya wanna lock this now, it'd be a good idea because the topic of the thread turned out to be completely false.

It's not unreasonable to have a reasoned discussion, including disagreements. It IS unreasonable to have a discussion that's more snark than anything else, which is my perception of how things went. Leave it at that unless you wanted me to name names.

Given that this turned out to be a rumor, yes, locked. Discussion of novel business models and less is more strategies and the like might well fit into the "who will compete with SpaceX" thread and fit well.