SpaceX's Fundraising Is Not Over With a $20 Billion New Bond Offering

Well, that didn’t take long.

Only a few precious days after Space Exploration Technologies (Nasdaq:SPCX) entered the record books with its (sorry) astronomically-sized IPO, it’s going to the investor well again. Again, it’s seeking billions of dollars; let’s take a look at this latest attempt to raise funds and tease out why the company is doing so.

A notable announcement

Before market open on Monday, SpaceX divulged in both a regulatory filing and a press release that it is floating an issue of senior unsecured notes.

Image source: Getty Images.

For those unfamiliar, notes are debt instruments that tend to have shorter maturities than bonds (usually two to ten years). However, the two terms can be, and frequently are, used interchangeably.

“Unsecured” means that the debt is backed only by the issuer’s reputation and its creditworthiness, as opposed to “secured” debt underpinned with collateral.

As per usual with initial announcements of important debt offerings, SpaceX hasn’t yet stated the aggregate principal amount of the issue, or details such as maturity dates and coupons (i.e., the amount of interest that will be paid regularly to note holders).

It did reveal that it aims to sell the notes to what it believes are qualified institutional buyers, and to investors outside of the U.S.

It also said it would use the net proceeds to repay an outstanding $20 billion bridge loan dating back to last year, plus associated fees and expenses. Anything left will be deployed for “general corporate purposes.” The company did not elaborate.

Bridge into space

That bridge loan was provided this past March, and the clock is ticking fast on it — bridge loans are temporary by their nature, after all. It matures on Sept. 2, 2027, and forms the bulk of SpaceX’s long-term debt, at least as of the end of March.

All told, this indebtedness stood at $21.9 billion, with the only accompanying item of note being “other financings” — defined by the company as that which “includes obligations related to certain artificial intelligence (AI) infrastructure assets recorded as failed sale-leaseback transactions.”

Presumably, SpaceX is replacing the bridge loan with longer-maturity debt. We can assume whatever’s left will be used for some of the company’s many, and consderable, capital spending needs.

Engineering data centers, AI models, rockets… and balance sheets

So basically, what we have here is a SpaceX-sized piece of financial engineering.

Despite the pushing-into-the-future image of the soaring space company, this is actually a fairly down-to-earth and — dare I say — traditional method of sprucing up a balance sheet. Especially for a business new to the stock market that still, at the end of the day, wants to impress and attract investors.

In the regulatory filing on the notes (although, interestingly, not in the press release), SpaceX made sure to mention that as of last Friday, June 19, it held roughly $100.8 billion in cash and cash equivalents.

To me, what management is trying to convey with this is that it has plenty on hand to fund its capex, at least for now. The notes issue’s prime directive is simple refinancing.

I’d be a bit hesitant to buy SpaceX stock, since it’s something of a chaotic assembly of businesses, and those capex needs, in segments such as AI and rocketry, will be significant.

Considering that, the notes issue doesn’t affect my opinion. Despite its large size, it’s actually a somewhat mundane piece of financial engineering for a company that’s going to be doing a lot of that going forward.

Eric Volkman has 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.