Analyst: The mystery of SpaceX’s value

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Tim Farrar of TMF Associates says the recent “breathless” valuations for SpaceX (ranging from between $80 billion to $100 billion) are inconsistent. He says the quoted company valuations have near-tripled over the past year, and with SpaceX’s share price – albeit privately held – rising from about $200 per share to $560 over the same period, hence the $100 billion overall valuation.

Farrar says: “There is a distinct inconsistency between what SpaceX has been telling the FCC about Elon Musk’s stake in the company and the amount of dilution implied by sales of new shares at these prices. Specifically, SpaceX told the FCC in November 2016 that Musk owned 54 per cent of the company, which declined to 50.5 per cent in November 2018, 47.4 per cent in April 2020 and finally 43.61 per cent in August 2021.”

“Over this period, SpaceX reported selling a total of $5.31 billion in equity, based on its Form D submissions to the SEC. Using the public reports on the share price for the transactions through April 2021 (before the [recent] equity raise of $345 million), I calculate that this represents approximately 22.4 million shares, which increased the share count from a little over 154 million shares to just under 177 million shares,” he adds.

“However, if the valuations and share prices quoted to financial reporters are accurate, Musk’s stated ownership percentage over the same period would have equated to 83.4 million shares in November 2016, 80.3 million shares in November 2018, 78.9 million shares in April 2020 and 77.2 million shares in August 2021. Did Musk really dispose of his SpaceX shares on a regular basis over this period? That seems unlikely, especially given that he had minimal taxable income in 2017 and 2018,” suggests Farrar.

Farrar analyses the share issues to take into account potential share options to staffers and suggests there is a ‘missing’ 14 million shares over and above the numbers reported to the authorities. This, says Farrar, could mean that recent buyers of SpaceX stock might actually be over-paying for diluted values and suggest the unaccounted for number would be equal to some 7 per cent.

“In addition,” says Farrar, “the most recent (October 2021) reported valuation of $100.3 billion at a $560 share price appears to reflect an increase of around 2.1 million shares since spring 2021. How much of that amount (worth $1.2 billion at this valuation) represents the shares used to acquire Swarm in August 2021? Although part of this increase might represent conversion of some of the options noted above (since SpaceX was selling 1.35 million existing shares), it seems very plausible that a significant proportion of these shares went to Swarm’s owners, which would represent a very high valuation (many hundreds of millions of dollars) for a company that had barely begun to offer commercial services.”

Swarm Technologies is the company behind a fleet of sandwich-sized Internet of Things (IoT) satellites that has been graded as one of the “10 Hottest Satellite Companies” in 2021. SpaceX acquired Swarm according to an FCC filing in August 2021. Swarm is now a direct wholly-owned subsidiary of SpaceX.


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