SpaceX shoots for the moon with $1.78tn IPO

0:02Good morning from the Financial Times. Today is Wednesday, June 10th, and this is your FT News briefing. The U.S. has launched new strikes on Iran, and SpaceX is asking investors to trust the process. Plus, spend it or save it. Ireland's grappling with its tax windfall. There are big gaps in Ireland's infrastructure across the board that aren't in step with it standing as one of the richest countries in Europe. Really, it has a lot of ground to make up. I'm Mark Filippino, and here's the news you need to start your day.

0:41The U.S. military retaliated against Iran yesterday. It was in response to what Central Command called, quote, unjustified Iranian aggression. President Donald Trump said Iran shot down a highly sophisticated American Apache helicopter on Monday night. The price of oil jumped slightly after the U.S. attacks just north of$92 a barrel. The strikes by the U.S. marked a new test of the fragile ceasefire between the countries. American and Iranian forces have traded fire in and around the Strait of Hormuz since the truce took hold in early April. Somehow, they've avoided full-blown war.

1:21Oh, hey, have you heard that SpaceX is going public on Friday? you probably can't escape the news, and it's hard to, with such a massive valuation, nearly$1.8 trillion. Most of that price tag rests on SpaceX reaching some pretty ambitious goals. Do investors believe Elon Musk can pull them off? Here to discuss is the FT's venture capital correspondent, George Hammond. Hey, George. Hey, Mark. So SpaceX's lofty price tag hinges on some pretty risky projects. Tell me about those. Yeah, so this is a rocket making company that is seeking to expand its dominion into space. Musk has always been very clear that he wants to go and occupy Mars ultimately.

2:04And the company is in some senses just one extensive bet on that project. So it's currently a rocket launching business. It has a satellite business, Starlink. He has now appended to that a social media company, an AI business, and particularly the latter of those, the AI business, he believes is going to be the great revenue driver for SpaceX going forward. And it's really the part of the business that underpins this very, very lofty$1.8 trillion valuation. Let's just play devil's advocate here. What happens if SpaceX can't do all this? There is a very real business at the core of SpaceX. They have a near monopoly on rocket launching.

2:48And Starlink has become a very, very successful part of the overall business as well. But combined, those contribute the bulk of what was around 18, 19 billion in revenues for the company last year. On the basis of today's valuation, it's 92 times that revenue figure, which is just astronomically far above big tech peers and others in the public markets. And if you're just looking at fundamentals there, analysts think that SpaceX is probably closer to a$780 billion company. That's a number from Morningstar. So that's a full trillion dollars off what it is going to list at. So I think that tells you to some degree the extent to which this listing is a bet on those moonshot aspirations that Musk has sketched out of occupying space, building a base on Mars and becoming the dominant AI provider.

3:44What have investors told you? Do they think SpaceX can pull all this off? So investors, particularly in Silicon Valley, have this adage around Elon Musk that no one has ever lost money betting on Elon Musk. And that's not strictly speaking true. He has definitely had some blowups in his past and he has melded various of his entities together as a way of avoiding investor losses. So he's not totally got a Midas touch, but they have generally been borne out in that conviction that he is a safe bet. So investors in the private markets are very willing to believe Musk's dreams. Even so, there are some raised eyebrows at what is a valuation that is some way above its previous private market round, which was at 1.25 trillion.

4:32George, the tech-heavy Nasdaq has been up and down over the past couple of days. is that investor nervousness pre-SpaceX IPO? You know, we also got the IPO filing for OpenAI earlier this week. Are investors just getting worried about all these stocks that are about to hit the market? It could be one of two things. And one of those is what you said, it's jitters around, you know, these very big AI or AI adjacent listings coming down the track. And we've seen public markets really driven much, much higher on the back of enthusiasm about AI. So it could be that trade beginning to unwind or crack.

5:09The other explanation is that this is the tide going out before SpaceX comes to market. And this looks like investors selling off some of the stocks that they had held, which are a proxy for the AI boom. So, I mean, chip makers are very directly attached, but there are other companies in that group. And they're selling those so they can go and buy directly into SpaceX, which has its own model, Grock. and then down the line, Opening Eye and Anthropic 2. That's the FT's venture capital correspondent, George Hammond. Thanks so much, George. Thank you.

5:51The European Central Bank moved to reign in Revolut's operations last summer. That's according to people familiar with the matter. Revolut is a UK-based bank and is Europe's most valuable fintech and it prides itself on rapidly developing and launching new products. That speed is exactly what the ECB was concerned about. The central bank temporarily stopped Revolut's European division from being able to release new products in parts of the continent, that is, until it had addressed, quote, deficiencies in approval processes. Revolut was also ordered to conduct a third-party review of its risk, compliance, and legal functions related to new product launches in Europe.

6:28The European central bank declined to comment. Revolut says that it's in touch with regulators and is committed to the highest standards of governance. Not only does the ECB's move threaten Revolut's growth strategy, it also highlights bigger concerns with Europe's startup environment. People are worried that the regulation stifles growth and innovation and prevents it from competing with the U.S.

6:55As the rapper Biggie Smalls once said, more money, more problems. That's the position that Ireland finds itself in after collecting a huge tax windfall over the past couple of years. The country is home to big operations by several U.S. multinational companies, including Apple and Microsoft, and they are bringing in revenue that's added up to some hefty budget surpluses. But Ireland's also set to spend money faster than any other country in Europe. Jude Weber is the FT's Ireland correspondent. She joins me now to talk about why some are warning that the country may want to pump the brakes a bit.

7:30Hey, Jude. Hi, Mark. So is that the scene for me? How did Ireland get all this tax revenue in the first place? Yeah, it's a nice problem to have, isn't it? Ireland is the base for a lot of big US companies. You mentioned Apple, there's Microsoft, there's Eli Lilly, all of these big corporations that have set up in Ireland sort of initially attracted by lower corporate tax rates. It's a gateway to Europe. So a lot of them have set up European headquarters or big operations in Ireland. And because they have their intellectual property here, they pay tax in Ireland. So all of this flows into Irish coffers, even though this doesn't exactly reflect production in the Irish economy.

8:10Okay, so they've got all this money. What are they spending it on? Well, Ireland has a big capital spending plan, an infrastructure spending plan. For example, right now it's building a big children's hospital. It has road transport, all of these other plans. You know, there are big gaps in Ireland's infrastructure across the board that aren't in step with it standing as one of the richest countries in Europe. Really, it has a lot of ground to make up. So the Irish Fiscal Advisory Council, which is an independent budget watchdog, has a new report out today warning that Ireland's just blowing through its corporate tax bonanza at a terrific rate.

8:48So it's got all this money, it's spending it. What's wrong with that? The problem isn't that it's spending the money. I mean, it has this enormous firepower from these surpluses. The problem, according to the Fiscal Advisory Council, is that it's spending so fast, but also that it's just blowing through its budget all the time. Every time it sets its budget, it then doesn't respect that budget and overspends. So what this means is that despite having budget surpluses, and the budget surplus this year is expected to be 9.2 billion euros, the surpluses are going to be too small to make the contributions that the government has promised into the rainy day funds to pay for future challenges, pensions, climate, infrastructure, and all of these things.

9:33And the result is that in order to save into those funds, they're going to have to borrow 30 billion euros more between now and the end of the decade. And that's ironic because it's a time when the economy is performing well, corporation tax revenues are still performing very well. So it just seems a bit odd that Ireland would have to borrow in order to save. But how does the government defend this? And, you know, how do you see this playing out long term? Well, the government says it's being very, very prudent and it's balancing the needs of today and the needs of tomorrow. But the fact is that the more money you have, the more sort of irresistible pressure you have to spend.

10:09I think the thing is that, you know, people, especially in the opposition, people look at the fact that Ireland has so much money coming in and think that there are so many problems. You know, the health service, there are problems in education, roads, energy, you name it. So people think there's tons of money to be spent on everything. The real problem with all of this is that the corporation tax is very, very concentrated. It's in just three companies, and they're widely believed to be Eli Lilly, Microsoft, and Apple, pay almost 50 % of Ireland's corporation tax. So if anything were to happen, you know, if their profits go down and they pay less corporation tax, or if they were to up sticks and leave from Ireland, which is obviously not expected at the moment.

10:51But if anything were to happen, then, you know, this would be very, very damaging for Ireland's public finances. Jude Weber is the FT's Ireland correspondent. Thanks so much for this, Jude. Thanks, Mark. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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