Spaced Out!
SpaceX - The Liquidity Black Hole. The Blind Squirrel's 'Monday' Morning Notes. Year 4; Week 13 of 2026.
Happy Easter to all who celebrate. This weekend’s note is a Benny & The Squirrel collaboration! We preview the jumbo SpaceX IPO. The two of us have moved a decent amount of primary paper between us over our careers. And this one is a doozy!
This note falls into 4 parts:
Background and Valuing the core SpaceX business (Starlink and Launch).
Dealing with the Pixie Dust and Jazz Hands (the xAI / Space Data Center bit).
Deal Dynamics (i.e., who buys all the paper).
The Liquidity Black Hole (why this matters to you even if you have no interest in the SpaceX IPO).
Having been an equity capital markets banker for over 25 years, the 🐿️ can safely say that he does not envy the task facing Wall Street’s finest later on this year. This is also one of those deals where the folk on the buyside have no choice but to pay attention. Sitting as an analyst at Fidelity in Boston, a younger Benny could typically be as picky as he wanted to be about the IPO calendar.
However, there are certain moments when a deal comes along that has proper “pay attention” factor for any manager of equities with (or without) a benchmark. The SpaceX IPO is one of those moments.
We started chatting about this topic over a month ago, while Benny was dodging Iranian missiles in an undisclosed bunker 5 star hotel in the Emirates.
I can say off the bat that it is unlikely that either of us will be subscribing for shares in the deal. Even if you also fall into that camp, please stick with us as the deal itself has some important market structure implications.
None of these implications are likely to be discussed in mainstream channels - the underwriting bank fee pool is likely to be measured ‘in the high 100s of millions’ of dollars (even if the issuer negotiates a chunky discount to the normal 4-7% of proceeds gross spread). That number buys a lot of cheerleading.
The cheerleading will not just come from the well-compensated sell-side. SpaceX/ xAI already has a highly diversified cap table…
…full of very vocal investors that (i) will be all over CNBC and (ii) who mostly acquired their SpaceX shares at a fraction of the price currently being touted by Musk. Block your eyes and ears!
However, when we start bandying around fighting talk like “concept valuation paper”, it behooves us to show our workings. The 🐿️ had a crack at handling the topic of valuing SpaceX back in October 2024 (‘To Boldly Go’). An extract:
As you can see, back then the 🐿️ was leaning towards the view that SpaceX was probably undervalued in the private markets IF you were to take the October ‘24 ‘back of napkin’ math above at face value. Indeed, by late 2024, the market had been pretty quick to update that space TAM market share assumption.
In the past 6 months however, the SpaceX valuation has risen to the extent that it is now priced at a 20% premium to the value of the 2040 space industry (in today’s money). Don’t forget that the space revenue TAM this was based on came from Morgan Stanley’s Adam Jonas - not known for his conservative assumptions as relates to Elon Musk connected projects…
Now that we have a potential deal within line of sight, it is time to do the bottom up work. We have built a multi-scenario valuation model for SpaceX. After that, we consider the implications / viability of an up to $115 billion equity raise by the company. Strap-in!
