SpaceX Just Filed for the Biggest IPO in History -- and One Number Has Wall Street Buzzing
Key Points
SpaceX's S1 filing revealed several numbers that raised eyebrows.
The biggest number -- and most surprising -- was the company's estimated total addressable market (TAM).
If SpaceX's TAM is realistic, its $1.75 trillion IPO valuation could be easily justified.
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Any fan of Star Trek can quote the intro to the classic sci-fi TV series: "To go boldly where no man has gone before." Fifty-seven years after the series ended, SpaceX is making fiction a reality.
The space technology pioneer founded by Tesla (NASDAQ: TSLA) CEO Elon Musk is also going where no other company has gone before. SpaceX plans to list its shares on the NASDAQ stock exchange with a reported valuation of around $1.75 trillion, making it the biggest IPO in history.
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This ginormous market cap would instantly make SpaceX the largest industrial company on the market. But after the company's S1 filing last week, another number has Wall Street buzzing.
Image source: Getty Images.
Thinking big, really big
Actually, several numbers in SpaceX's S1 filing caught analysts' attention. For example, it's been frequently noted that Starlink is SpaceX's cash cow. The satellite internet service provider generated $11.4 billion in revenue last year, roughly 60% of SpaceX's total revenue.
The $12.7 billion of capital expenditures incurred by xAI also raised eyebrows. Musk merged the AI unit that developed the Grok large language model with SpaceX earlier this year.
However, the number that is arguably the most jarring to Wall Street is SpaceX's estimated total addressable market of $28.5 trillion. The company stated in its S1 filing that this figure is "the largest actionable total addressable market (TAM) in human history."
What's especially remarkable is that SpaceX believes that $22.7 trillion of its TAM is related to enterprise applications. This implies that Starlink isn't the most valuable part of SpaceX's business over the long term. Surprisingly, management seems to think it's xAI.
But there's a close connection between xAI and SpaceX's launch business. Musk predicts there's a massive opportunity to run data centers in space.
Significant skepticism
If SpaceX's TAM is truly $28.5 trillion, a market cap of $1.75 trillion isn't unreasonable. However, it's fair to say that there's significant skepticism about the $28.5 trillion number.
Even if we assume the TAM is realistic, SpaceX won't necessarily be the biggest winner. Other AI companies will almost certainly enter the space race too.
Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) owns a stake in SpaceX and has also invested in AST Spacemobile (NASDAQ: ASTS). Amazon (NASDAQ: AMZN) has a close relationship with space company Blue Origin. Jeff Bezos founded both.
Interestingly, SpaceX could face the same challenge with investors that Musk's current publicly traded company, Tesla, faces. Some view Tesla as only an electric vehicle maker. Others see it as a budding leader in robotaxi. Musk thinks humanoid robots are Tesla's biggest opportunity.
The take you have of Tesla's future business directly affects your assessment of the company's valuation. The same is likely to be true for SpaceX. Investors' decision on whether or not to buy the space stock after its IPO will hinge largely on what they think the company's biggest business will be in the next decade and beyond.
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Keith Speights has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends AST SpaceMobile, Alphabet, Amazon, and Tesla. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
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