Visionary entrepreneur Elon Musk founded Space Exploration Technologies Corp, or SpaceX, in 2002 to reduce space transportation costs so humanity could eventually colonize Mars. While Musk's ultimate dream for the company has yet to become a reality, SpaceX has become one of the most valuable start-ups in the world, valued at more than $150 billion as of mid-2023. The sky is the limit for SpaceX.
SpaceX has a growing commercial operation. It develops and manufactures spacecraft, provides launch services, and operates a commercial satellite-based internet service from its Starlink satellites.
The company is growing increasingly valuable as its revenues and profits soar. That likely has many retail investors wondering when they'll get their chance to invest in the company. Here's a look at what to consider if that opportunity ever arises.
Is SpaceX publicly traded?
Is SpaceX publicly traded?
Elon Musk controls the company and owns a significant stake. It's one of Musk's top investments, with reports estimating that he holds between 40% and 50% of its shares. Employees and venture capital investors own the rest of the company's shares.
When Will SpaceX IPO?
As of mid-2023, SpaceX didn't have an initial public offering (IPO) on the calendar. The company also didn't have any plans to go public. Musk said in April 2023 that SpaceX doesn't need to raise capital to finance its investment programs, so it doesn't need to complete an IPO to bring in money from outside investors to finance growth.
Meanwhile, the company has an active internal trading program to allow employees and existing investors to sell shares. SpaceX had an agreement with new and existing investors to sell as much as $750 million of stock from insiders at $81 per share in 2023. That provides employees with liquidity for their shares so that the company doesn't need to complete an IPO to allow insiders to sell shares.However, there is some speculation that the company would take its Starlink satellite internet business public. While Musk said in an interview in mid-2023 that it wouldn't be legal for him to comment publicly on a potential IPO of the business, he reportedly told employees the company wouldn't likely take that unit public until 2025 or later.
How to buy
How to buy SpaceX stockBecause SpaceX isn't a publicly traded company, investors can't buy shares through their brokerage accounts. However, some investors can still buy shares through other platforms that offer secondary trading of pre-IPO companies.
Unfortunately, since most investors don't meet the accreditation qualifications, they can't directly buy shares of SpaceX until it goes public. However, they do have alternative options to consider. Following are some top space stocks that can give investors exposure to the markets SpaceX is seeking to capture:
In 2023, L3Harris Technologies (LHX -0.28%) acquired Aerojet Rocketdyne, a leader in aerospace, defense, and rocket propulsion. Aerojet Rocketdyne has delivered some of the most important innovations in space exploration and discovery over the past century. The acquisition adds to L3Harris Technologies' capabilities as a leader in delivering innovative technology to the space, air, land, sea, and cyber sectors.
Rocket Lab USA
Rocket Lab USA (RKLB 1.25%) is an integrated space company founded in 2006. It provides government and commercial customers with launch services, spacecraft manufacture, satellite components, and on-orbit management solutions.The company started out focusing on small launch capabilities by developing the Electron launch vehicle, which is now the second-most frequently launched U.S. rocket. It's currently developing Neutron, a larger, next-generation launch vehicle. Rocket Lab has also invested in diversifying its operations into providing additional space-related solutions.
Virgin Galactic Holdings
Virgin Galactic Holdings (SPCE 2.59%) is an aerospace and space travel company founded by well-known entrepreneur Richard Branson. It pioneered human spaceflight for private individuals and researchers.
The company went public in 2019 when it merged with a special purpose acquisition company (SPAC) run by famous investor Chamath Palihapitiya. After many delays, the company launched its first test spaceflight in 2021. It finally launched commercial services for scientific research in 2023, with plans to launch a new class of spaceships for commercial space tourism services by 2026.
ETFs with exposure
ETFs with exposure to SpaceXAnother alternative to consider for investors interested in SpaceX stock is an exchange-traded fund (ETF) focused on the space sector. As of mid-2023, three ETFs focused on the space sector:
- ARK Space Exploration & Innovation ETF (NYSEMKT:ARKX): The actively managed fund (by Cathie Wood) focuses on companies engaged in space exploration and innovation. It aims to have between 35 and 55 holdings. It has a reasonable ETF expense ratio of 0.75%. As of mid-2023, the ETF had almost $300 million in assets under management (AUM). Its top five holdings were Trimble (TRMB 2.35%), Kratos Defense & Security (IRDM 1.06%), AeroVironment (AVAV -0.55%), The 3D Printing ETF (PRNT 2.73%), and Komatsu (KMTUY -1.28%).
- Procure Space ETF (NYSEMKT:UFO): This ETF owns shares of companies involved in space-related industries. Though tiny (roughly $30 million in AUM as of mid-2023), it also has a 0.75% expense ratio. It had 36 holdings led by Sirus XM Holdings (SIRI -2.32%), Rocket Lab USA, Trimble, Eutelsat Communications (OTC:ETCMY), and Garmin (NASDAQ:GRMN).
- SPDR S&P Kensho Final Frontiers ETF (NYSEMKT:ROKT): The passively managed fund focuses on companies that make products or provide space travel and exploration services. The tiny ETF had only about $18 million in AUM and a 0.45% gross expense ratio as of mid-2023. The fund held 32 stocks, led by Boeing (BA 0.56%), Heico (HEI -0.83%), Rocket Lab USA, Oceaneering International (OII 0.34%), and L3Harris Technologies.
Should I invest?
Should I invest in SpaceX?
Although most investors can't buy shares of SpaceX yet, those interested in the company must consider a couple of crucial aspects before buying shares (assuming it eventually completes an IPO). Two of the most important are profitability and valuation. Here's a closer look at these two critical investment factors.
Is SpaceX profitable?
Since SpaceX isn't publicly traded, it isn't required to disclose its financial results. However, given the company's popularity, it has revealed some financial data, which The Information reported in mid-2023.
The report showed that SpaceX expects to tally $8 billion in revenue in 2023 from launch services and its Starlink satellite internet business. Starlink would produce about $3 billion in revenue, assuming it reaches 2 million subscribers.
The Information also reported that SpaceX should produce about $3 billion in operating profit in 2023 based on an estimated operating margin of 38%. After adjusting for taxes and interest expenses on any debt, SpaceX would post about $2.3 billion of net income.Meanwhile, Starlink is nearing profitability on a stand-alone basis. The business produced positive cash flow in 2022, and SpaceX expected the unit to make money in 2023.Assuming that data is correct, SpaceX is profitable, which investors rarely see in a start-up. It shows that SpaceX is off to a good start. If it can grow its revenue and profitability at high rates, it would give its stock the fuel to skyrocket in the future.
What is SpaceX's valuation?Valuation is another crucial factor for investors to consider before buying any stock. Paying too high a price could cause investors to lose money, even if profits take off.As of mid-2023, SpaceX had a private market valuation of $150 billion ($81 per share) following a $750 million share sale agreement with new and existing investors. That was about a 5% increase from its prior valuation of $77 per share, or $140 billion.
While the company is profitable, that's a hefty valuation. At $8 billion in estimated revenue for 2023, SpaceX trades at a price-to-sales ratio (P/S) of almost 19 times. If it were a publicly traded company, it would have the third-highest P/S ratio among stocks in the Nasdaq 100 index in mid-2023.
Meanwhile, at $2.3 billion in projected net income, SpaceX trades at a forward price-to-earnings ratio of 67 times. Although that's expensive, it's not quite as pricey as another Musk-led company; Tesla (TSLA 1.02%) fetched 85 times earnings in 2023.Those are hefty valuation multiples for the company. However, SpaceX could grow into its valuation if its revenue and profits skyrocket in the coming years. So, it could be trading at a more reasonable valuation by the time it goes public.