Sunday, October 24, 2021

In a letter backdated 2013 Musk warned about implications if SpaceX went public

Back in 2013, the Space Exploration Technologies Corp. (SpaceX) chief Mr. Elon Musk had cautioned its employees regarding the vast fluctuations of the stock market. In the email, Musk addressed employee concerns about missing out on share price growth due to the company being kept private, and he also covered several topics, which included fears about the company being targeted by short-sellers and operating costs.

During that time, SpaceX had just launched the Falcon 9, and its partnership with the National Aeronautics and Space Administration (NASA) was in its early stages. In the letter to its employees, Musk has also expressed their thoughts about conducting a public offering of SpaceX’s shares however, looking at the current status of the company it’s evident that Elon didn’t receive enough support for his ideas to take off.

In this eight-year-old mail, we got some insights into SpaceX’s operating costs at the time and Musk’s rationale for not listing the company’s shares on the public market. Further in the mail, Musk also explained to its employees about the volatility present in the stock market and how it would compound with the risky nature of SpaceX’s business.

Musk, in his letter also highlighted that it would be unfeasible to take SpaceX public before it has developed a transport system capable of Martian missions. And this proved to be a smart decision for SpaceX, and Musk:

It is also not correct to think that because Tesla and SolarCity prices are on the lofty side right now, that SpaceX would be too. Public companies are judged on quarterly performance. Just because some companies are doing well, doesn’t mean that all would. Both of those companies (Tesla in particular) had great first-quarter results. SpaceX did not. Financially speaking, we had an awful first quarter. If we were public, the short sellers would be hitting us over the head with a large stick.

We would also get beaten up every time there was an anomaly on the rocket or spacecraft, as occurred on flight 4 with the engine failure and flight 5 with the Dragon pre valves. Delaying the launch of V1.1, which is now over a year behind schedule, would result in particularly severe punishment, as that is our primary revenue driver. Even something as minor as pushing a launch back a few weeks from one quarter to the next gets you a spanking. Tesla vehicle production in Q4 last year was only three weeks behind and yet the market response was brutal.

Musk starts the letter by stating:

Per my recent comments, I am increasingly concerned about SpaceX going public before the Mars transport system is in place. Creating the technology needed to establish life on Mars is and always has been the fundamental goal of SpaceX. If being a public company diminishes that likelihood, then we should not do so until Mars is secure. This is something that I am open to reconsidering, but, given my experiences with Tesla and SolarCity, I am hesitant to foist being public on SpaceX, especially given the long-term nature of our mission.

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