Man On The Moon

Shoot for the Stars

In late December, reports from Bloomberg emerged that Elon Musk was in talks to sell $500-750M of SpaceX stock at a $175B+ valuation.

This valuation means that SpaceX, a private company, has the potential to be the largest IPO ever when it goes public. The largest to date was Alibaba’s $169B IPO in 2014.

For additional context, Disney’s valuation at the end of 2023 was $165.3B…

Everyone from Cathie Wood to Swedish fintech startups has been clamoring for a spot on SpaceX’s cap table.

SpaceX’s meteoric rise is nothing short of astronomical, but let’s start with a grounded approach to analyzing its growth drivers.

The Missing Link

The primary purpose of SpaceX is revolutionize space technology with the ultimate goal of inhabiting Mars and making life multi-planetary.

SpaceX’s mission statement, while bold, tells us absolutely nothing about the business model.

The business makes money from two primary sources:

• Launches. SpaceX charges commercial and governmental partners to launch goods into space. Partnerships include NASA, The European Space Agency, the Japan Aerospace Exploration Agency, and private commercial partners.

• Starlink Revenue. Starlink is SpaceX’s satellite product that gives internet service to subscribers. Revenue from Starlink grew from $222 million in 2021 to $1.4 billion in 2022.

Estimates indicate that Starlink revenue in 2023 ballooned to $4.2 billion… a 3X increase from 2022 numbers and more than the $3.5 billion SpaceX generated from launches last year.

This is important for two reasons:

• The margins on internet service are significantly better than the margins on launching rockets. Comcast posted 37.4% EBITDA margins on its home internet business, and SpaceX is aiming to hit 60% margins at full scale.

• SpaceX is estimated to have seen $9 billion in sales last year and projects $15 billion in 2024. If these numbers hold true and Starlink continues to grow at a larger rate than launches, then SpaceX’s overall profitability will continue to grow at a rapid pace. Starlink had 1 million subscribers at the end of 2022 and 2.2 million at the end of 2023.

A Piece of The Pie

Rumors surfaced that Musk would take SpaceX public towards the end of 2024…

And they were quickly shut down by Musk himself.

But last November, Ron Baron, CEO of Baron Capital, told CNBC that he expects SpaceX to IPO Starlink in 2027 or so. Baron has around $1.7 billion invested in SpaceX and is a large Tesla shareholder as well.

The average S&P 500 company is worth ~$86 billion.

Assuming the $175B valuation holds, if SpaceX went public today it would be in the top 50 of S&P 500 companies by market cap.

Safe to say a significant part of the wealth creation for early investors has already taken place.

Also safe to say that significant upside still exists.

Nonetheless, a very long list of VC funds, angel groups, growth equity funds, and private equity funds have made great returns by buying SpaceX early, and individual exposure to these funds, and therefore assets like SpaceX, is the future of investing.

MLP & PPA Merger Overview

Major League Pickleball and the Professional Pickleball Association have completed their merger and brought in new capital to support the league. Here’s a high level overview of what took place:

• The deal brings both MLP and the PPA into a holding company, although no information has been released on a new name

• The new league will see a $75 million investment from the S.C. Holdings private equity firm, D.C. Pickleball Team owner Al Tylis, PPA Tour owner Tom Dundon, the Pardoe family, and other MLP owners.

• The merger brings together 150+ pro pickleball players, many of whom have signed fresh multiyear contracts on an expanded calendar

Check out this thoughtful article by Forma Capital partner, Mary Owen.

This merger provides additional value to the LA Mad Drops investment through Forma Capital, an investment that has already seen a significant mark-up.

We are very excited about this development and view a Forma investment as an arbitrage opportunity, as you are buying today’s value at yesterday’s price.

For more information email [email protected] or visit our site to get started.