Source : THE AGE NEWS
Yee-haw! Elon Musk is offering Australian investors their own special opportunity to buy a small piece of his wild space dream – the listing of his $US1.77 trillion ($2.5 trillion), YES TRILLION, SpaceX.
This is one for the adrenaline junkies. It’s a ride without a harness, airbags or safety nets, and few road rules.
The Australian corporate regulator has even required some modifications in a special Australian addendum to the SpaceX prospectus – so that Australian investors get an extra layer of warnings about how they could potentially lose their money in the SpaceX float, which is scheduled for this week.
As leading Australian retail broker, Commonwealth Bank has even come to the party, enabling those with CommSec accounts to take part in the raising or trade shares once listed.
So it is off to the races for the Musk believers, who appreciate that no matter how many times his big promises have not been met, some of them have.
Over the past few decades Musk has made many of his believers extremely wealthy. Anyone who bought Tesla shares six years ago when they were less than $US50 has felt the financial joy (despite being a highly volatile share, it last traded close to $US400).
The New York Times even tallied how many goals Musk had outlined over more than a decade and how many had been achieved: 19 per cent achieved over 600 claims, the publication reckons.
This opportunity to take a punt on Musk’s SpaceX comes at the same time as the federal government is pushing through changes to the tax regime that distort investment decisions away from investing in shares, particularly risky ones.
To be fair, Australian investors who buy into Musk’s SpaceX float probably won’t be looking that hard at tax treatment of capital profits and losses. Rather, they will be punting on whether Musk really can colonise Mars, create a humanoid with enough dexterity to thread a needle, or flood the streets with self-driving Teslas.
If you are sufficiently convinced by Musk’s sales spiel that you are prepared to overlook numerous previous instances of his failed goals, then you probably won’t be too bothered by the overarching warning in capitals contained in the Australian prospectus.
“AN INVESTMENT IN SPACEX IS HIGHLY SPECULATIVE AND YOU MAY LOSE SOME OR ALL OF THE VALUE OF YOUR INVESTMENT,” is the Australian document’s opening statement.
(This reads more like the voiceover contained in ads warning about the probability of losing when betting on sports games.)
And then there is this governance warning, which at its heart says Musk’s role is an omnipotent force. He gets a disproportionate influence relative to his shareholding.
“Mr. Musk (our Founder, Chief Executive Officer, Chief Technical Officer and Chairman) will through his shareholding, SpaceX’s dual-class structure and provisions in SpaceX’s charter and bylaws, have the power to control the outcome of matters requiring shareholder approval, including election of all directors, and to control the business and affairs of SpaceX. If you invest, you will be a minority investor with no practical control or influence over the board, business or affairs of SpaceX.”
Sure, that’s scary if you’re even vaguely interested in governance hygiene. But for years Musk has been doing and saying whatever he pleases (via social media), upsetting regulators and shareholders, and its doubtful that he will change. His investor acolytes probably don’t care.
Nor will Musk true believers get too hung up on how the $US75 billion in proceeds from the float are going to be spent.
“The expected use of net proceeds from the Global Offer represents our intentions based upon our present plans and business conditions. However, SpaceX cannot predict with certainty all of the particular uses for the net proceeds from the Global Offer or the amounts that it will actually spend on each of the uses set forth above …” the prospectus warns.
The company has a very real and very profitable business, satellite internet business Starlink. This business accounts for most of its earnings, and capex-thirsty SpaceX overall is losing money.
But there is plenty of SpaceX valuation that the pundits call blue sky (or maybe that should be “blue space”). It’s the strategies and revenue estimates for businesses that don’t exist yet, or haven’t been tested. So ascribing a valuation is largely a lashing of hope and some educated guesswork.
The Australian prospectus neatly sums up this guessing dilemma in its lengthy section on SpaceX risks.
“Many of our initiatives, including those to develop orbital AI compute at scale, manufacture AI chips at scale, establish a lunar economy, develop human augmentation systems, and transport humans and cargo to the moon and Mars, involve significant technical complexity, unproven technologies, or technologies that do not exist or may require significant advancement, and such initiatives may not achieve commercial viability,” it said.
This is not a company that will sit neatly in investment banker valuation models. This requires a leap of faith in Musk.
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