Why EchoStar Rallied Today
Key Points
A prominent tech outlet reported that SpaceX may go public next week.
The estimate for the raise and valuation were higher than previously thought.
The good news lifted all space-oriented stocks, including this proxy for SpaceX shares.
- 10 stocks we like better than EchoStar ›
Shares of EchoStar (NASDAQ: SATS) rallied 10.5% on Wednesday as of 12:44 p.m. EDT.
Since it sold some of its wireless spectrum to SpaceX last summer, partially in exchange for SpaceX shares, EchoStar has emerged as a "public market proxy" for the still-private SpaceX, given that its SpaceX stake now accounts for a majority of EchoStar's market value.
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As such, EchoStar and other space stocks rallied on reports that SpaceX may go public as soon as next week, with a valuation estimate that is higher than previously contemplated.
The Information reports that SpaceX may go public soon
Today, technology-facing news magazine The Information reported that SpaceX may go public in an initial public offering as soon as next week. According to the publication, SpaceX will raise about $75 billion through the offering, with up to 20% going to retail investors. The Information also said SpaceX's IPO valuation could be as high as $1.75 trillion.
That raise amount and valuation would be higher than analysts previously estimated, and an IPO next week would also occur sooner than expected. Prior estimates put SpaceX's valuation at $1.5 trillion, with a goal of raising $50 billion by June.
Management may be looking to capitalize on the current high enthusiasm for space stocks, particularly SpaceX. According to TMF Research, SpaceX dominated the rocket launch market in 2025. Yet even beyond the rally for EchoStar, the higher-than-expected SpaceX valuation lifted other space-oriented stocks today as well.
Image source: Getty Images.
SpaceX or EchoStar?
Many investors hold EchoStar today to gain exposure to SpaceX, but once SpaceX goes public, which would be the better buy?
That's a bit difficult to say. After all, investors tend to like "pure play" stock exposures, often giving "proxies" like EchoStar a discounted valuation.
However, EchoStar also has other assets. While most of these are not very exciting and don't hold much value, such as the DISH TV, Boost Wireless, and Hughes satellite broadband businesses, EchoStar will also soon receive an influx of cash, once the company closes on all the spectrum sales it made last year.
Management intends to invest that cash productively to generate shareholder value, but it's uncertain how that will play out.
Thus, it's possible EchoStar may sell off once SpaceX goes public, if EchoStar shareholders sell EchoStar to buy SpaceX. However, if management can generate value from EchoStar's additional cash, EchoStar could ultimately be a better value than investing in SpaceX directly. Only time will tell.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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