Questions over SpaceX losses

When you have a billionaire backing a business, and there’s no publicly issued quarterly documentation to study, observers could be excused for assuming that all is well with a company like SpaceX and its founder Elon Musk.

But the lack of launch activity since a September 1st explosion on one of its Falcon 9 rockets (which destroyed Spacecom’s Amos-6 satellite in the conflagration) and an absence of positive news these past months provokes questions over its financial status.

And there’s been some bad news just lately. First, there was the switch last week by Inmarsat (and HellasSat) of a heavyweight satellite contract from SpaceX to arch-rival Arianespace. We don’t have the financial numbers but it certainly means a loss of at least $60-$70 million in overall revenue, and an impact on profitability.

In October and early November the market was issued with a slew of regular statements saying that SpaceX would return to launch very shortly.

On October 9th, SpaceX’s president Gwynn Shotwell, in her speech at the National Academy of Engineering in Washington DC, said: “Hopefully we’ll recover from this and be back flying a couple times this year.”

On October 28th Shotwell talked about having “replicated” the likely cause of the explosion and that the company would be “launching again in November and certainly prior to year-end”.

On November 4th SpaceX stated (on CNBC) that it would return to operations by mid-December.

Since those statements, the market has heard nothing regarding the all-important Accident Investigation examination into the problems with the explosion. On December 7th SpaceX said: “We are finalizing the investigation into our September 1 anomaly and are working to complete the final steps necessary to safely and reliably return to flight, now in early January with the launch of Iridium-1.”

Without a finalised Accident Investigation Report the FAA cannot permit SpaceX to resume flights.

The press release effectively said that the launch of a batch of 10 small Iridium satellites had slipped by at least a month. Then came the cancellation of the Inmarsat flight.

In November the influential business newspaper The Economist said that Musk’s personal balance sheet is rich in assets, but poor in terms of ready cash.  The newspaper said that this year (2016) will see Musk’s portfolio of products burn through $2.3 billion.

And the income side of the SpaceX balance sheet continues to be under pressure. In June this year SpaceX talked of its forward booked manifest of 70 launches being contracted, and with a value of “over 10 billion” and that the company was “profitable and cash-flow positive”.

The company no longer claims that ‘profitable and cash-flow positive’ position in its on-line comments. That SpaceX is capable of launching at least a rocket per month is undoubted. Indeed, with its Vandenberg launch pad now available it could manage two launches per month (one from Vandenberg and the other from Cape Canaveral once repairs have been completed). Consequently, a return to profitability can be depended upon once that routine is established.

But Musk and his SpaceX team were burning through cash at a rate of “roughly $800-$900 million a year” (in 2013) and – inevitably – more today. That’s likely to be $80-$90 million a month today. And it could be more.

The overall market, and especially satellite operators and notably SpaceX’s now long-suffering clients, can only hope that Musk can keep SpaceX afloat through these troubled times.

SpaceX had won an enviable reputation for ingenuity and – prior to the September 1st problem – even reliability. That could quickly evaporate if these launch postponements and delays continue for much longer.

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