On June 1, SpaceX issued an amended registration statement for its upcoming IPO that contains a couple of noteworthy additions to the original filing submitted two weeks earlier. In one new provision, the rocket and AI giant announced that it will reserve 5% of the offering’s shares for “certain employees and persons… which may include parties with whom we have business relationships and friends and families of our executive officers.” The document adds that these grants “will not be subject to a lockup restriction.” In other words, the folks who receive these allocations, unlike Elon Musk and top execs who can’t sell for around a year, are free to unload their holdings any time after SpaceX’s debut, slated for mid-June.
These recipients could pocket gigantic windfalls overnight. It’s now widely reported that in the IPO, SpaceX will issue 555.6 million shares at $135 each to raise roughly $75 billion. So it’s handing friends and family and chosen employees the right to buy $3.75 billion in shares (5% of $75 billion) at the insider price paid by investors, primarily anointed big institutions, that purchased in the underwriting phase. How much the executives, their relatives and SpaceX business partners gain right away depends on how much SpaceX’s stock pops on day one. Of course, we don’t know what will happen to SpaceX shares once the bell rings at the Nasdaq. A substantial rise over the pre-trading price would send the valuation into the stratospheric $2 trillion range or higher.
But IPO jumps typically average around 20%, and a strong pop is highly valued by both issuers and book-running bankers as the hallmark of the deal’s success. If SpaceX scores a 20% bump, the group would reap an immediate gain of $750 million. At 30%, we’re talking $1.125 billion. And once again, they’re free to exit at any time.
An extra surprise buried in the amended S-1 could provide a pivotal clue for SpaceX’s future plans. It’s a single new sentence on page 51, in the “Acquisitions, Divestitures and Other Strategic Transactions” section. SpaceX states, for the first time, that it “may issue a significant amount of equity in connection with future transactions.” A number of Wall Street observers noted that this declaration is too strong to be dismissed as boilerplate language, and suggested that it boosts the probability that SpaceX will purchase Musk’s second largest holding, Tesla. This writer explored this strong possibility in a piece last week.
The “may issue a significant amount of equity” alert trained the spotlight on a big potential deal SpaceX had already discussed in the first S-1, but didn’t then attract much notice: Its option to purchase venture-backed AI coding assistant Cursor for $60 billion in an all-stock transaction. The acquisition looks highly likely, since if SpaceX cancels, it’s agreed to pay a total of $10 billion in breakup and service fees. The looming buy raises a red flag for SpaceX shareholders; a Cursor buy would dilute their holdings by around 3.5%. It’s also a reminder that SpaceX intends to prove extremely adventurous in deploying what could be vastly overvalued shares as currency for expansion. Once again, SpaceX would be betting big on a business requiring gigantic future growth to pay off. Cursor’s profits aren’t publicly disclosed, but at $60 billion, SpaceX would be paying an immense 20 to 30 times this hotshot’s current run rate for revenues.
That brings us back to a possible SpaceX-Tesla combo that would mark the biggest merger in history. If both sides’ investors received stock in proportion to the current market caps, SpaceX’s shareholders would be surrendering around 45% of their company, and paying a PE of over 400, to swallow the EV-maker that posted a puny $3.9 billion in net profits over the past four quarters.
The sentence that sprouted in the amended S-1 highlights that SpaceX plans to capitalize on what the math deems a highly inflated stock to do big deals, maybe including the biggest ever. The problem: It’s potentially targeting incredibly expensive candidates where most of the value rests just as it does at SpaceX, not in current profitability, but hope for the future.
