Will Elon Musk's SpaceX Go Public?

SpaceX is a California-based rocket and spacecraft manufacturer founded by Elon Musk in 2002. SpaceX, also known as Space Exploration Technologies, is unique in that it operates via private funding rather than through government resources. The company's immediate goal is to develop reusable rockets, and its loftier goal is a mission to Mars.

Wholly owned by management and the company's employees, SpaceX has received funding from Founders Fund, Draper Fisher Jurvetson and Valor Equity Partners. The company made a $1.6 billion agreement with NASA to deliver cargo supplies to the International Space Station (ISS). SpaceX has forged relationships with various companies to secure $5 billion in contracts including a $2.6 billion commercial contract with NASA in September 2014 to provide passenger services to American astronauts. NASA is planning on launching a commercial crew mission in the later part of 2017. NASA's relationship with SpaceX has become so entrenched that a level of dependence exists; the U.S. government has cut funding for various space programs over the past five years, making the resources offered by SpaceX and other private ventures and even foreign governments invaluable. In May 2012, the company's Dragon spacecraft visited the ISS and was the first craft developed by a private company to do so. SpaceX uses launch facilities located in Florida, California and Texas.

As a private company, SpaceX offers launch services to its clients and transportation services for astronaut crews. In possession of valuable technology that is difficult to replicate, SpaceX occupies the private launch and crew transport niche for space services. Few of SpaceX's competitors have its usable technology, such as the Merlin engine that supports the Falcon 9's propulsion. The closest competitor is Boeing, and NASA has previously used the Russian Federal Space Agency's services. Clients looking to make use of the company's Falcon 9 or Falcon Heavy can look forward to prices in the vicinity of $61.2 million for the use of the Falcon 9 or $90 million for the use of the Falcon Heavy.

By pursuing a goal of creating reusable rockets rather than the industry standard of one-time use rockets, the company is in line to save large sums of money on rocket manufacturing and decrease the cost of entering space. This is not Musk's first lofty project, but with interplanetary goals in mind, it is the most exalted. Other successful projects from the entrepreneur include the Tesla car, the development and sale of PayPal, and Zip2. Musk previously took both PayPal and Tesla public, so with that consideration in mind it would be unsurprising if SpaceX was also made public.

SpaceX's journey as a rocket and spacecraft manufacturer has had to jump hurdles presented by parts manufacturers seeking higher-than-agreed-upon prices; the challenge of creating inventory at a rate consistent with client expectations, a problem that Tesla has faced as well; and several cash shortages. This has not stopped investors from offering a high valuation of $12 billion to SpaceX. Musk is the company's largest shareholder.

SpaceX seeks to rely on its own manufacturing process to acquire needed parts, which has also helped to save on costs incurred by the company, as was the case with an internally developed radio; commercial units purchased externally would have cost $50,000 to $100,000, but by developing its own unit, SpaceX was able to manufacture the item for $5,000. Freed from the restrictions associated with government bureaucracy that tend to plague organizations such as NASA, SpaceX's development as a company and as a manufacturer of rockets has been surprisingly speedy, with the entrepreneurial-minded Musk fueling the rapid creation of parts, securing of testing launch pad sites and employee acquisition from competing companies and universities.

Given SpaceX's need for additional funding in conjunction with the company's past history with cash shortages, it is likely SpaceX stock will be introduced to the public, but when that will happen is uncertain. Unique in the story of SpaceX is the company's government contracts, which Musk is likely to want to keep. A public offering could deter the security of future government contracts, though the necessity of NASA outsourcing may override a decision to turn away from SpaceX due to a public offering. By operating privately, SpaceX is able to free itself from the burdens of transparency and shareholder claims and, as a result, it can do as it wants, when it wants, to promote the company's goals. The presence of Boeing as a publicly traded company has not prevented the U.S. government from making use of the company's technologies and services.

Musk has previously made statements suggesting SpaceX will remain private, citing the company's long-term goals as being misaligned with the quarterly expectations of stockholders. Musk said the company would go public once regular flights to Mars have been achieved by the company. Taking direction from that comment, it would appear that an issuance of public stock will not be for quite some time; Musk's offered a company-wide goal of putting humans on Mars by 2026. The company was given additional investments from Google and Fidelity in January 2015 totaling $1 billion or 10% ownership of SpaceX. The argument remains that opening SpaceX to the public could hinder the achievement of the company's lofty goals and change its fundamental mission to Mars into a mission for profits. The disparate goals of investors and the goals of Musk and the company will keep SpaceX away from an initial public offering (IPO) unless a funding from the U.S. government or institutional investors such as Google is unexpectedly dropped.

SpaceX, at 13 years old, is still a young space company and one that does not suffer from low financial backing. Though many retail investors are interested in the company from a stock issuance perspective, they will have to wait. To date, SpaceX employs over 3,000 people and is in possession of three different vehicles. If the company hits its 2026 goal of reaching Mars safely for colonization efforts, Musk will have crafted yet another success. In the meantime, the company is more concerned with attaining more government contracts and successful launches that are free of explosions.