Musk’s SpaceX Plans a Spinoff, IPO for Starlink Business | Hacker News Reader

Musk’s SpaceX Plans a Spinoff, IPO for Starlink Business

bloomberg.com

65 points_Microft27 comments

Can someone who knows more about the finance stuff explain why a company (especially one like SpaceX that prides itself on being super vertically integrated) would spin off a part of the business as a public company? Is it just to help employees whose equity is relatively illiquid? Is it to raise capital? Insulate the parent company from potential regulatory/legal issues?

Sidenote: SpaceX actually is sorta-kinda publicly traded. Alphabet and Fidelity bought ~10% of SpaceX. Fidelity has a few mutual funds that are partially invested in SpaceX (like 0.5% of the fund is SpaceX). I'm kinda surprised someone hasn't made a FauxSpaceX ETF that buys the Fidelity SpaceX fund and does some shorts/options to try and cancel out the non-SpaceX parts of the fund.

It's privately traded. Employees receive shares.

I have 3-4 acquaintances who are very early SpaceX employees and my understanding from conversations with them is that they are not able to sell their shares at the moment.

This is second hand knowledge though, so maybe I'm wrong.

There is no liquidity for SpaceX employees at this time. This is based on my experience attempting a transaction without a forward contract.

They’ve occasionally bought shares back from employees internally alongside financing rounds, but those aren’t super frequent.

How does the value of a private company affect the fund, if it is not being traded? Valuation at last round could be miles off.

Speculation: SpaceX maintains control by selling less than 50% of Starlink. This is essentially just asking the public if they would like to invest in the Starlink business with no change to operations.

I think so.

Starlink is capital-intensive and untested as a business proposition. This keeps the risk walled off from SpaceX and lets them raise without diluting ownership of SpaceX. (It also means guaranteed profit for SpaceX from the pockets of new investors.)

Not sure why they'd go public instead of raising the capital privately, though.

Well, they need to raise around $10B to get it fully operational, so that might be hard to do privately.

Also, perhaps Musk thinks that having public retail investors is worth it. After all, even though they contribute approximately 0% to Tesla's funding, retail investors and owners generate approximately 100% of the hype, online content and general proselytizing. That is, someone will have to defend Starlink from accusations that it has ruined the sky, and Musk alone can't do it.

Retail investors contribute to Tesla's financing by offering interest free loans in the form of pre-order deposits.

Those are customers, not retail investors.

A non-trivial portion of the hype around Tesla comes from shareholders. I've been hearing more and more people lament that they missed the boat now that the stock hit 700+. It seems like a genius idea to offer a new investment opportunity to the public. This should help generate hype for the Starlink network, which will live or die based upon its adoption rate.

Starlink is SpaceX’s only real “business” given that the global rocket market is still incredibly small. It may be valuable to raise a bunch of capital for it individually

Starlink has a lot of business potential

As Tesla is highly valued, this looks like a great timing to go public and just raise cash for Starlink, and also for SpaceX investors.

Also it seems like the main reason Elon doesn't want SpaceX to go public is because he's afraid that short term looking investors would take control from him and vote the mission of colonizing Mars down.

An announcement of an announcement is not substantive enough to be on topic for HN: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...

Actually, this is an announcement of a possible future announcement. Since they'll announce the announcement itself at some point, that makes this article an announcement of an announcement of an announcement. We can call that a third-order announcement.

If anyone can find an example of a fourth-order announcement, that would be interesting enough to be on-topic for HN again.

So does this mean the submission was administratively flagged?

Not criticising, just asking for clarification on what being judged as 'not substantive enough to be on topic for HN' entails.

Yes, I moderatorly downweighted it.

SpaceX & Starlink are symbiotic, but do look like distinctly separate businesses. Each wouldn't want to be subject to major problems of the other: if one suffers disasters, other isn't financially impacted. An "at cost" arrangement would greatly benefit both, former getting $ to cover launches (by which they can test & commoditize equipment/process), latter getting cheap transport.

https://outline.com/7jtePr

Directly opening about:reader?url=<...> in Firefox works as well by the way.

This makes a ton of sense for SpaceX. SpaceX is a high risk business with intermittent revenue and very long term goals. Avoiding the burdens of being public lets SpaceX do what they need to do without worrying about quarterly revenue targets and the scrutiny of Wall Street.

Starlink is a relatively low-risk service company with a clear business model, easily predicted and consistent revenue. Exactly the sort of business which Wall Street loves. By going public with Starlink, SpaceX can raise a lot of money on the public markets and give it's investors and employees a way to cash in on their investments without actually making SpaceX public. They can also retain controlling interest in Starlink and benefit from the success of their child company.

TLDR: It's a clever way for Musk and company to finance SpaceX and keep their investors happy while keeping SpaceX itself private.

When Starlink has Class action lawsuits opened by Astronomers SpaceX doesn't want to be liable. edited

Steps on Soapbox

SpaceX and the ilk are openly planning to destroy the night sky. If allowed to continue it will literally be the greatest environmental disaster in generations. While the idea of Fast Internet access unilaterally across the globe would be a tremendous accomplishment I can not think it is the worth the cost.

If destroying terrestrial astronomy is what it takes to get astronomers to recognise indigenous rights, then I will be pouring my money into StarLink.

uhm, what?

The biggest telescopes in the world are built on land that is special or sacred to various indigenous people, or where the land was “leased” with no intention of paying the rent.

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