SpaceX nears lift-off

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0:38Rob Armstrong: the stock market listing of spacex is coming and the hype is real elon musk reckons this thing i don't know cobbling together ai satellites and all sorts of other stuff is worth, get this,$1.75 trillion. The bravado is quite something. Today on the show, we pick through some of the details of the SpaceX listing and ask, seriously now, what the hell? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist at the FT in London, which is sweltering, I tell you, under a record-breaking heatwave. Stay hydrated, people. Joining me, back from his travels in New York, we have the big fella, Mr Robert Armstrong.

1:29Rob Armstrong: Rob, say hi.

1:30Katie Martin: Hi.

1:32Rob Armstrong: Or you could even say ciao, given that you've been on your travels. Ciao, ciao, Bella. But we also have, back on the show, Mr John Foley, head of Lex. John, hi. Hi, Katie. So, John, you've been digging through hundreds of pages of docs from SpaceX about its proposed listing. What is your favorite bit of these documents, please?

1:56John Foley: My favorite bit, Katie, is the dinosaurs. It's the bit that says that if we don't buy shares in SpaceX, then humans might go the same way as the dinosaurs.

2:04Katie Martin: Is that because Elon Musk is going to shoot a huge asteroid at anyone who fails to purchase shares? That's what it says. That's literally what it says. Yeah.

2:15John Foley: No. No, what does it literally say? So the reason that Musk says that SpaceX is doing what it's doing now, it's in the section called Why This Matters Now, is that they want to make sure that humans don't have the same fate as the dinosaurs. And the way to ensure that is presumably to build colonies on Mars and start mining asteroids and putting data centers in space, which the dinosaurs did not do.

2:39Katie Martin: I think that is what killed the dinosaurs in the end is lack of data centers. anyway there's so much there's so much about this but the offering document how the market is preparing for these massive ipos i i don't even know where to begin where

2:56Rob Armstrong: where shall we begin with this well let's begin with like so with the start right so spacex says that its mission is to build the systems and technologies necessary to make life multi-planetary to understand the true nature of the universe and to extend the light of consciousness to the stars so ambitious how that cashes out how that cashes out is well they have

3:21Katie Martin: a space business which we all know about they do thing they do send things into space and last year for billion dollars of revenue doing that and a small loss. So the costs were 4.7 revenue for loss somewhere around 700 million dollars. So one thing you're buying when you buy this at a valuation of one and three quarters trillion American dollars is a loss making space business. Cool. That is not growing wildly fast, by the way. The revenue in that business in 2025 grew at under 10%. So that's something. Next business, John, what do we have? Connectivity. This is a real business and a very good business.

4:07Katie Martin: This is today the good bit, right?

4:09John Foley: This is Starlink, which is the satellite communications business. And it's where most of the revenue and most of the profit, well, the only profit actually comes from at the moment at SpaceX. But it is growing very rapidly. It's got about 10 million subscribers. It could have more than that. and the game there is putting satellites into space and hooking up people who maybe don't have access to broadband at the moment. The problem with this is that the further into emerging markets SpaceX gets with this, the lower the price it can charge. So its revenue per user is falling. And also satellites, and they don't really get into this and it's hard to see this in the documents, but satellites depreciate very quickly.

4:42John Foley: So they last about five years and then you have to replace them. So the depreciation costs for a satellite business are really high. They don't actually break that down very clearly in this document, But it is something that investors will need to think about.

4:54Katie Martin: So it's a capital intensive business is what you're saying. So, but just for the record,$11.4 billion in revenue, 2025, up almost 50 % from the year before. What is that?

5:05Rob Armstrong: The Starlink bit?

5:06Katie Martin: Starlink bit. Income from operations,$4.4 billion. So as of right now, it looks like a darn nice little business. I don't know that I'm going to pay for 1.3, one and three quarters trillion US dollars for it. But moving on, isn't there a third business in here somewhere? Yes.

5:28Rob Armstrong: Well, the third bit is the AI bit.

5:30Katie Martin: That's Grok.

5:31John Foley: That's Grok. It's Grok and Colossus, Colossi, which are the data centers that he's built. That is a massive money burner.

5:38Katie Martin: It is a huge pile of burning cash. So that is$3.2 billion in revenue in 2025, a loss of$6.4 billion. So the first amazing fact that we need to flag here is not the dinosaurs. It's the fact that people are lining up to pay$1.75 trillion, which would make this, I don't know, one of the 10 biggest stocks on Wall Street, right?

6:10John Foley: Number seven.

6:11Katie Martin: Number seven or something like that for a seriously loss-making business.

6:16John Foley: We worked out that it would be the seventh biggest company in the S &P 500. But if you look at it in terms of revenue, it would be about the 250th. It would be the same size as General Mills, which makes Lucky Charms breakfast cereal.

6:32Rob Armstrong: But you've got to think big, guys. So like in the prospectus, in all the documents, the company says that its total addressable market is$28.5 trillion, which is like a lot.

6:47Katie Martin: To scale that, world GDP is about$125 trillion. So the addressable market is a fifth of GDP.

6:56Rob Armstrong: And it's basing this number on something, at least in part, from something called the Digital Cooperation Organization. brackets nope me neither um so there's kind of quite an obscure kind of body that's not backed by the u.s or most of most european countries that's come up with this number and they're kind of running with it so first of all like there's like there's big ambition here it's all kind of yes let's live on mars light of consciousness 28.5 trillion dollars yada yada But actually, quite a lot of the sort of financial engineering about this is almost more interesting because it's like, guys, what are you doing here?

7:40Rob Armstrong: There's a lot of creative stuff going on with how this company works.

7:45Katie Martin: John, Katie, let's ask a simple question. Is it mad to pay one and three quarters trillion dollars for this loss making business? Is that just insane on its face, John?

7:57John Foley: So I approached this question sort of backwards by thinking, what would make it not mad?

8:04Katie Martin: Yes.

8:05John Foley: Because it is obviously mad. Let's just be clear about the fact that it is mad. But what would make it not mad? So if you look at it's trading, this will be trading at about 100 times sales, right? A bit less than that. Is anything else trading at 100 times sales? Well, like some biotechs are. Cerebrus, the chip maker that listed the other day, is trading at 110 times. some quantum companies, like very speculative things. So there are precedents for companies trading. But those are much smaller. They're smaller and they're very speculative. Yeah, this is going to be like, as you say, 1.75 trillion.

8:38John Foley: The other way of thinking about what would make it not mad, that market that he sees as being worth 28.5 trillion, if SpaceX can get about 3 % of that market, then it's not mad. By our back of the fag packet, well, as Katie points out, that market may be completely made up because it's from some body that we've never heard of. Also, he gets a bonus if he gets the company to 7.5 trillion. And if you think that he can get it to 7.5 trillion in 10 years, then what he's asking now is not mad.

9:09Rob Armstrong: Musk does have form for making really outlandish predictions about how his companies are going to develop, right? Wasn't he saying that Tesla at one point was going to be a$7 trillion company? He's very clearly not that.

9:21John Foley: Yeah, he's talked about Tesla being at least 10 trillion. I think he once said that it could potentially be worth 100 trillion. He said with a prevailing wind. Before I choke on the cynicism of you two Brits,

9:41Katie Martin: I would like to say that it is important to separate the carnival barker, Elon Musk and the business builder, Elon Musk. And I agree with you, the Carnival Barker side of him is very unattractive character, but the business builder is a very impressive character. That's fair. He built the first viable independent electric car company. That car company might not be going, doing great right now, but it changed the market for electric cars in the world. He built Starlink, which is a major part of the world's communications apparatus. And he's built a real business shooting stuff into space. These are really impressive things.

10:30Katie Martin: And I think the non-crazy bit is of paying up for this IPO is this is a guy who builds stuff successfully. Right? So it's not as if I am trying to sell this to you. then it would really be crazy. This is a guy who's built some stuff. So that would be my positive case.

10:52Rob Armstrong: I mean, to answer your question, Rob, I think, yeah, it is like plainly on its face, ridiculous for this company, even despite that sort of potential to have this sort of valuation straight out of the gate. This is assuming that it does get that valuation straight out the gate. But let's move on to the financial engineering that's taking place to make sure it does get to that valuation.

11:14Katie Martin: Yes, let's do this. I think this is the most interesting bit of the story.

11:17Rob Armstrong: There is some wild stuff going on. Yeah.

11:20Katie Martin: On the side of the kind of Wall Street apparatus, the indexes and the exchanges are really bending over backward to make sure that this one works, this offering works. The thing that kind of knocks me out of my chair is they're letting this company into the indexes sooner, right? And they are letting it be represented, weighted in the index in a way that was not allowed before, right? So they're changing the rules of entry to accommodate this company. And to me, this is like, do you guys want to go to court if this goes wrong? Like, is it like, I've always wanted to be questioned by a senator on national TV.

12:10Katie Martin: You know, it's like, what are you guys doing? It seems very sporty.

12:16Rob Armstrong: There's two types of ways to invest in the stock market, right? One of them is you do stock picking, you choose individual stocks that you want to buy and some stocks that you don't want to buy, and you just build your own portfolio. But overwhelmingly, the much more prevalent way that people invest in markets is to buy an index product, something that just tracks an index is this passive investment. It's a divisive issue. Some people hate it. Some people love it. Yada, yada, whatever. Point is. Mostly we love it.

12:45Katie Martin: Mostly we love it.

12:46Rob Armstrong: Yeah, it's a really low cost, easy way of just buying an index. And so NASDAQ has already said that on one of its heavily tracked indices that SpaceX will have a fast track. FTSE Russell and S &P are looking at it. They're reviewing it. If I was a betting person, which I'm not, I would say they probably will choose to include it. So as you say, it means that the speed with which it will enter this index, or potentially these indices, is going to be much quicker. And it's going to be able to do that, even though the amount of the company that's actually getting floated on the public market is tiny.

13:25Rob Armstrong: So it's a$1.75 trillion company, Musk thinks, but he's listing, what is it, 75 billion of it, something like much smaller.

13:35Katie Martin: There's so much in what you just said. Let's start with the timing issue. The traditional thinking was we don't really know how much a company is worth until it's banged around in the markets for a while. And a lot of investors have had a chance to get a look at it. It kind of finds its natural price range. And for this reason, companies that are newly listed tend to be volatile. And that's sort of the justification for not jamming them into the big indexes right away because you have this big floppy, unpredictable thing acting all crazy until it kind of finds its feet in the market. Rushing it into the big indices is like, who cares about all that?

14:28Katie Martin: We need a lot of passive demand for this product. It needs to be in the big indexes as fast as possible. So all the passive buyers in the market will own the thing, right? Is that a fair description, John? Have I done any injustice?

14:43John Foley: I think the case for tweaking the rules is that indices reshuffle on a regular basis. And in the NASDAQ's case, every once a year, they decide what's in and what's out. If SpaceX lists in May and NASDAQ doesn't reassess its membership until December, you've got like six months in which the biggest – not the biggest company in the world, but like the seventh biggest company in the American market is not reflected in the index. And so they can with some plausibility say, you know, this would be a real anomaly and it would be a distortion and so on.

15:15Katie Martin: Okay. Let me just do the basic challenge to that view, right? Yeah, which is easy. When you have a nominally one and three quarters trillion company, but there is only 5 % of it or whatever being listed, you know, or 10 % of it or whatever it is, you have a scarce number of shares, relatively speaking, right? That means their price is going to be high. And so to determine the value of the company, you multiply the price on these quite scarce shares by an enormous share count that represents the whole company. And so who's to say it's the seventh largest? If you're only floating a small percentage of the shares, you can't just do that multiplication and declare this is the seventh largest company in America.

16:02Katie Martin: Yeah, that is totally correct.

16:03John Foley: Like market caps are not real. Nothing is real. Birds aren't real. And I would distinguish between flexing what they call the seasoning requirements that you talked about and the date of inclusion versus this really odd thing about giving an extra weighting to thin float companies, which does seem to me to be not great and also incentivizes companies to have low floats.

16:30Katie Martin: But all of these things work together. Speed of entry into the index, how it is weighted in the index relative to the actual float of its shares, other factors we can also talk about. All of this basically allows for the speedy transfer of risk in this company from company insiders to Joe and Jane public.

16:57Rob Armstrong: Well, let's talk a little bit about that as well, because normally when a new company comes to market, those insiders who have some equity in the company to start with, they have these lockup periods, which are generally quite long, which means that they're told you can't sell your shares for a certain period of time. Again, you have to let this thing like settle down on the market before you sell up. In this case, some of those insiders have an accelerated path towards getting rid of some of these shares. So it does sort of somewhat smell like insiders just want to like get rid of this stuff and shove it onto retail investors.

17:33Rob Armstrong: That would be the cynical view here.

17:35John Foley: It's also, though, lockups are kind of slightly overstated in the sense that you can always sell early if the underwriters let you. So it's not a rule that you can't break the lockup. It's just like Goldman Sachs and Morgan Stanley or whoever, if they give you permission, you can. So maybe this just reflects reality. They would have let them out anyway.

17:51Katie Martin: I think the larger context here is that changes in rules and longstanding practices are happening at a moment when the valuation of the whole market is extremely high. And that valuation is supported by a small number of companies that have extremely, extremely high valuations clustered around AI, which this is one. I could give you my long, tiresome lecture on you never know when you're going to have a correction in an overvalued market, et cetera, et cetera. It doesn't matter. But this is going to look awful if the correction comes this year. Right. Wall Street has floated this historically large deal.

18:36Katie Martin: Rules have been changed on the left and on the right to make it all happen. there is going to be widespread ownership of this thing. And if it turns into a turkey, we're all going to court. And it's going to, that's what the story is going to be. I'm just saying that, right? And, you know, things happen and buyer beware and nobody's forced to own anything they don't want to own. And we're all grownups here. But if you are any of the underwriters of this thing, you better have all 10 fingers and toes crossed that the AI bubble doesn't pop in the next 12 months. Because if it does, they're going to be doing discovery on your emails.

19:16Rob Armstrong: The other kind of element of the documents that sticks out here is like governance shmovenance, right? So basically, this is the Elon Musk show. He basically can't be removed from his position. He gets to overrule his board on whatever he likes.

19:35Katie Martin: It's hard to sue him.

19:36Rob Armstrong: Very hard for shareholders to sue him. So a bunch of US pensions have got together and called it the most management favorable governance structure ever brought into the US public markets at this scale.

19:49Katie Martin: Facebook now meta, Google now alphabet also have these structures, but I sure wish they didn't. I think they're unfair and anti-capitalist and they are against motherhood and apple pie.

20:00John Foley: I am a pro-disclosure libertarian on this topic. like but i agree with you in the sense that i wouldn't want i i think it's foolish to buy shares in a company where someone has and there are worse structures than what musk has by the way there are companies where the votes that the founder has go up as they sell their shares to make sure their control stays the same if you buy shares in that company you have only yourself to

20:23Rob Armstrong: blame if the founder does something stupid yeah but if it gets plonked into the index product you own then you know you're screwed aren't you that is the issue we've been telling retail

20:33Katie Martin: investors, quite rightly, for 30 years now, since John Bogle and Vanguard and all the rest, the right way to invest is with passive products. And that is true. It is the right way to invest. You know, capture the open return of the market without taking individual company risk, diversify, et cetera, et cetera. And that's been the best financial innovation that we've had in hundreds of years, 100 years. The downside of that is you're going to have, you can't discriminate. I can't say when I buy my S &P 500 index product, I'd like the S &P 500 without that stupid meta and its dual class shareholders.

21:17John Foley: Why can't you do that? Why can't there be a tracker that says we only invest in companies without dual class shares or we only invest in companies that Elon Musk doesn't run? You could launch that tracker and no one would buy it. but you think but there's no reason you can't have an s &p x spacex and if people want that

21:32Katie Martin: then it should exist and will exist it's just complexity the beauty of the whole thing the beauty of the vision of passive investing is that it was just dead simple and you didn't have to think about it and whatever it's a dumb product for dumb people it was free money and uh and if you make the world complicated in certain ways, the beautiful simplicity is drained away.

21:56Rob Armstrong: It sounds like a case of and shitification of passive investment. So this thing is going to happen, whether you like it or not, you may as well get ready for it. Another thing that is going to happen, whether you like it or not, is long short. So we'll be back in a second.

22:16Katie Martin: Markets move fast. Get the insights you need in 10 minutes with Barclays Brief, a podcast from Barclays Investment Bank. Each week, our experts analyse market themes, helping you anticipate what's next. Listen to Barclays Brief wherever you get your podcasts.

22:32Rob Armstrong: Okie doke. Now it is time for long, short, that part of the show where we go long, a thing we love or short, a thing we hate. John, what have you got?

22:42John Foley: I'm going to go long at horror films or movies as we call them here because I'm a huge horror film buff. Me too. I didn't know that.

22:49Katie Martin: Why do we have that in common?

22:50John Foley: I think we might be entering a golden age of horror movies. I went to see Obsession yesterday, which is brilliant and very low budget. And we've had this year already a few really good movies. And I think because the zeitgeist, the theme of 2026 generally is horror, like just life is horror, I think we're going to have that.

23:08Katie Martin: Have you watched Widow's Bay on Apple? No, not yet. It's very good. It's really good. Katie, what do you have for us?

23:15Rob Armstrong: I find horror movies too scary. I am long the enhanced games you know the thing it's like the Olympics but on steroids and everyone's allowed to have steroids and it was touted as it's going to like smash all these world records and let's see what the human body can do if we pump it full of juice anyway only one world record has been beaten not that it will be recognised by the world record people it was 50 metres freestyle men's competition the contestant managed to squeak ahead of the official world record with loads of dope and with some sort of special swimming costume that you're not allowed to wear in the proper proper sports also there are multiple people who have won events there who were not doping that's very disappointing very disappointing for the organizers yeah very amusing to me yeah of course i wonder why

24:12Katie Martin: So they're just there to make a point. Yeah.

24:15Rob Armstrong: Well, also the prize money is massive. So some of them are like, sod it. I'll do it. I'll just go for it. So one of them who won an event said, man, they got to do better than that. They need to train a little harder. Get on that shit a little bit more.

24:31Katie Martin: Good trolling. I find myself surprised to be long the Iranian news media because I find myself reading these articles in the FT and in other newspapers about what the developments are in this war. And of course, you can't believe anything the Trump administration says because they just make it out. Oh, it's we're almost have a deal. We don't have a deal. We're going to drop bombs. And you have to go down four paragraphs to find out what the Iranian news media is saying to get some sense of what actually might happen. So, you know, a lot of bad things have happened in this war, but it may have brought the Iranian news media into a kind of golden age.

25:16Rob Armstrong: So the golden age of Iranian news media, the steroid Olympics and horror movies. I think it's a good combo. Chaps on that. We're going to come back on Thursday. Brits in the meantime. Remember Factor 50 and stay hydrated. Unhedged is produced by Jake Harper and edited by Brian Erstad. Our executive producer is Jacob Goldstein. We had additional help from Topher Forehead. Special thanks to Laura Clark, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30-day free trial is available to everyone else. Just go to ft.com slash unhedged offer. I'm Katie Martin.

25:57Rob Armstrong: Thanks for listening.

26:13We'll see you next time.