The public listing of SpaceX may represent an incredible opportunity for investors, a unique chance to profit from extraterrestrial exploration.
Yet it remains to be seen as to whether its opening $135 a share is a fair valuation, and questions are also being raised about the ethics of such an investment. The enormous carbon emissions associated with such a venture are being treated as almost incidental, with focus instead laying on SpaceX’s CEO, Elon Musk.
Whatever personal thoughts may be towards the world’s richest man and influential figure within the current Trump administration, it cannot be denied that his control over Space X remains near absolute.
Following the listing, he is expected to control more than 80 percent of the voting rights while simultaneously serving as chief executive, chief technology officer, and chair of the board.
Market indications point to a valuation of at least $1.8 trillion for SpaceX. However, Danish scheme AkademikerPension has claimed that even under optimistic assumptions, the company’s value cannot reasonably exceed $1 trillion. In the pension fund’s assessment, this makes the stock at least 80 percent overvalued.
It is this combination of governance and valuation concerns that has led AkademikerPension to already add SpaceX to its exclusion list.
“If this were solely about responsible investment, SpaceX would have been excluded in the blink of an eye because of its catastrophic governance structure,” says Anders Schelde, AkademikerPension’s chief investment officer.
“In our view, Tesla (of which Musk is also CEO) already has the worst governance structure among the world’s largest listed companies — and SpaceX is even worse,” he continues.
Responsible investment nonprofit ShareAction are also keenly aware of the ethical implications of investing in SpaceX.
“Many British pension savers could end up invested in SpaceX,” says Catherine Howarth, chief executive of ShareAction.
“Before that happens, pension schemes should ask robust questions of fund managers seeking an allocation to the offering. How will they assess the risks associated with extreme concentrations of voting control, what stewardship rights and escalation mechanisms will realistically exist if concerns arise? And how are they evaluating the implications of investing in a company that may come to play a major role in global communications, AI infrastructure, satellite networks and defence-related systems, while remaining effectively under the control of one individual?”, she continues.
There are also implications for such a massive IPO on the wider global equity market already one dependent on the performances of a few large companies, namely the ‘Magnificent 7’ tech stocks. Placing further resources into SpaceX only risks further consolidation.
Adam Fischer, senior defined contribution investment consultant at Isio, says: “For DC pensions, this (consoldiation) presents a growing challenge. Many savers are invested in passive strategies that automatically allocate more capital to the largest companies. While that approach has benefited from the strong performance of large-cap technology stocks in recent years, it also means pension outcomes are becoming increasingly reliant on a relatively small number of companies continuing to deliver exceptional growth.
“As a result, trustees and providers are having to think carefully about how they balance the efficiency of market-cap-weighted investing against the need for diversification across different regions, sectors and sources of return.”
Areas that could be of continuing profit for SpaceX include StarLink, a satellite internet constellation that carries the capacity to provide internet coverage to some of the most remote parts of the world. The company also has long standing government and defense contracts for technologies that could be increasingly relied on in any upcoming ‘space race’.
For reasons such as this, investment platforms such as AJ Bell are aware of the continuing optimism surrounding SpaceX.
“Space excites people because it is the great unknown and SpaceX has a blueprint to turn dreams into dollars. NASA’s successful Artemis II mission around the Moon earlier this year has also driven renewed interest in space among the public,” says in the firm in an official release.
However, AJ Bell is also keenly aware of the risks surrounding such an investment, as even before its listing on the Nasdaq only six other companies on the exchange have a higher market valuation; Nvidia, Alphabet, Apple, Microsoft, Amazon and Broadcom.
“Many institutional investors might sit on the sidelines for now and not rush to reposition their portfolio to free up money to buy SpaceX shares. It’s common for many fund managers to give companies time to prove their worth as a listed entity, such as showing they can meet sales and earnings expectations in the first year on the stock market,” the release says.
