Original URL: http://www.theregister.co.uk/2011/05/12/spacex_ipo_cfo_hired/

Elon Musk prepares SpaceX rocket firm for IPO

Plans to keep 'freedom to ignore Wall Street', though

By Lewis Page

Posted in Science, 12th May 2011 12:11 GMT

Famous upstart startup firm SpaceX, soon to deploy the biggest rocket seen since the days of the Apollo programme, will shortly go public. However its founder, colourful nerdwealth geek-icon biz kingpin Elon Musk, seems likely to retain a controlling interest.

Hints had emerged previously that Musk might seek further funding through a public offering, and yesterday SpaceX in effect confirmed that an IPO is coming.

The company announced that it has appointed former Broadcom accounting officer Bret Johnsen as CFO, leaving no doubt that his first task will be to prepare SpaceX for a market offering.

“Bret has an exceptional talent for financial management in high-growth, publicly held technology companies,” said Musk in a tinned quote. “His experience will be invaluable to SpaceX as we implement the financial standards and processes needed to allow for the possibility of becoming a public company.”

SpaceX, founded in 2002, has made meteoric progress. It has successfully developed an all-new rocket engine, the Merlin, which uses kerosene fuel rather than comparatively hazardous and difficult-to-handle cryogenic liquid hydrogen. Kerosene is a somewhat less optimal rocket fuel, but the benefit it brings in terms of safety and convenience are such – according to Musk and SpaceX – as to cut the costs of space launch drastically.

This design philosophy seems to have been borne out in reality, as the Merlin has now flown successfully in the Falcon 1 and Falcon 9 rockets (named for the number of Merlins they employ in their first stages). Furthermore the Falcon 9 has achieved a first for a non-government entity: last year it successfully put the SpaceX-developed Dragon capsule into orbit, after which the Dragon returned to Earth safely with test payload - a large cheese - intact.

SpaceX has achieved all this with just 1300 employees, and perhaps unsurprisingly its commercial space launch rates are attractive indeed compared to those offered by the existing providers. The company has landed NASA contracts to deliver supplies to the International Space Station aboard unmanned Dragons, and more aimed at ferrying astronauts using a future, enhanced version (also claimed to be capable of landing on Mars, could it be delivered to the red planet somehow). The company has also landed lucrative commsat deals, and is known to be aggressively pursuing the large secret market in launching US spy satellites into orbit.

SpaceX says it has now achieved four straight years of profitability, and it could well be seen as a highly desirable investment when the IPO comes.

A word of caution for eager profit-hunting investors may be in order, however. Musk has always made it quite clear that he is not primarily in the rocket business to make money, but rather to advance humanity's frontier by making access to space cheaper.

Specifically, he has stated on many occasions that his personal primary goal is to make travel to Mars much easier, as Mars in his view is the most promising location for a self-sustaining human presence off Earth. Such a base or colony would in time ensure the survival of the human race even if a disaster were to befall our original, fairly fragile habitat on the mother planet.

Musk told journalists just last month:

While I do think there's likely to be an economic payoff by transporting large numbers of people to Mars, it requires a bit of long-term thinking, that maybe goes beyond the quarterly cycle of Wall Street.

So some people on Wall Street think it’s crazy, and what I actually should do is milk the government and commercial companies and charge as high a price as possible, which I will not do. So I want to make sure that I can ignore such things.

It would appear that SpaceX, with its small payroll and new low-cost technology, could easily undercut such rivals as United Launch Alliance and Arianespace and still make mouthwatering amounts of money. But evidently Musk will be inclined to cut prices well below the short-term optimum: and that he will want to plough a lot of his profits into long-term future projects rather than using them to create a crowdpleasing balance sheet in the short term.

Musk would doubtless argue that market share - and, down the road, share of enlarged or even entirely new markets - is better than short-termist profiteering even in financial terms let alone altruistic ones. Nonetheless it would seem that those seeking a quick buck would do well to look elsewhere.


One thing's for sure: for the investor who actually has any grasp of technology, almost any valuation of SpaceX would make more sense than pricing Skype at $8.5bn. ®