Elon Musk has a history of successful first days for IPOs. On December 14, SolarCity
(NASDAQ:SCTY), a purveyor of solar power devices and services, saw its stock price jump 47%, from $8.00 to $11.79, on its first day of trading. (At the time of this writing, the stock is down from that level to $10.58). Musk is a major shareholder. In 2010, the electric vehicle company Tesla Motors
(NASDAQ:TSLA), of which Musk is a co-founder, saw its stock price increase 41% on the first day of trading. Moreover, Musk founded PayPal and sold it to eBay
(NASDAQ:EBAY) for $1.3 billion in 2002. Now, speculation is mounting for an IPO at Musk’s most ambitious project, SpaceX, the space exploration company he founded the same year he sold PayPal.
In December 2008, NASA granted SpaceX its Commercial Resupply Services contract, for at least 12 missions and $1.6 billion in funding. Four years later, on May 21, 2012, SpaceX became the first privately held company to put a capsule in orbit. And not only was the test a success -- one for the history books -- but SpaceX's Dragon capsule also carried out a mission, delivering over 1,000 pounds of supplies to the International Space Station. With so much support from NASA and SpaceX’s proven ability to fly missions, Musk is a few steps closer to achieving his ultimate goal: to put men on Mars. With IPO talk surrounding SpaceX, some market watchers expect that as soon as next year, investors may be able to invest in a company with not only the intention of putting men on Mars, but with the plan as well.
Musk already runs missions at SpaceX that cost about half as much as they would have cost NASA; we can expect those prices to continue falling as SpaceX launches more missions and streamlines technology. He has speculated that the cost of getting a full-scale colony started -- which would include getting there, building a biodome, and beginning the process of terraforming the planet (using various methods, including greenhouse gases, to make the atmosphere livable and breathable for humans) -- would total about $36 billion. He has already said that this figure represents a partnership between the private and public sectors, marking one of the real strengths of the whole idea, and one of the reasons why I believe Elon Musk means what he says. Moreover, he wants to send 80,000 people and charge them $500,000.
People have speculated about missions to Mars and full-fledged space travel in science fiction for decades, but Musk is bringing the science closer to reality. The company has $4 billion worth of contracts, a busy schedule of launches of satellites and restocking missions for the ISS through 2017, and as Musk says, without elaboration, SpaceX is "cash-flow positive." And with its costs moving toward being way more efficient than NASA's costs ever were, SpaceX may take the burden of funding NASA off of taxpayers.
Granted, SpaceX will have some competition, even if those competitors are not on the scene yet. A British company called Reaction Engines Ltd. has announced plans to develop an engine that works like a rocket in space and a jet in the atmosphere and, as the company said, "could displace rockets for space access and transform air travel by bringing any destination on Earth to no more than four hours away.”
That idea is still speculative, but could potentially make Reaction Engines a competitor of SpaceX; it is the kind of technology that Musk and his team are working on. Or, maybe SpaceX will go public and buy Reaction Engines. Either way, Elon Musk is motivated and has a lot of cash behind him.
Other competitors include Universal Space Network, which specializes in satellites and communications for the global government and commercial space community, and Virgin Media
(NASDAQ:VMED) billionaire Richard Branson's Virgin Galactic, which will provide the world's first spaceline. Virgin will send tourists on suborbital space flights in the coming years (with plans for orbital flight way down the line). It will also launch suborbital science missions and orbital launches of small satellites. Though Virgin Galactic is strong competition for SpaceX, Branson does not share Musk's unabashed, interplanetary ambition.
Of course, an IPO may still be a few years off for SpaceX, and Musk's 80,000-person colony is at least a technological generation away. But if we do see an IPO late next year, the stock could be a great long-term play, and the beginning of more than a new industry; it could be the beginning of a new planet for human life.
No positions in stocks mentioned.