Musk goes from a 10% chance of success to a $2 trillion valuation

Just before the opening of Nasdaq trading on Friday, Elon Musk walked in front of a cheering crowd at the SpaceX company’s hometown in Texas. His rocket maker was about to hit the public market at an estimated $2 trillion valuation, instantly becoming America’s sixth most valuable company.

Musk, who is a few weeks away from his 55th birthday, told employees that, in the company’s early days, he gave it “less than a 10% chance of success.”

“If people had told me this was going to happen, I would have been like you, man, you must be smoking really good crack,” said Musk, who founded SpaceX in 2002 and has grown it to 22,000 full-time employees. “Because I think this company will fail.”

Musk is now the world’s first trillionaire after his company launched the largest IPO in history, raising $75 billion, nearly three times the amount of the next largest US offering, Alibaba’s in 2014. There are 10 US companies worth at least $1 trillion. Musk runs two of them.

Whatever uncertainty Musk said he felt when SpaceX got off the ground, he didn’t show it in the days leading up to the IPO. In a brief road show, SpaceX priced its IPO at $135 and told investors to take it or leave it. No price model is used to measure demand and there is no negotiation with prospective shareholders.

That’s despite the fact that SpaceX has half the revenue of any tech megacaps and posted a $4.9 billion loss last year, with a net loss since its inception of more than $41 billion. After the stock closed Friday, SpaceX was worth $2.1 billion, giving it 112 times last year’s earnings.

“This was not a deal that was priced based on market forces,” said Lloyd Greif, an investment banker with Greif & Co. Los Angeles. “This was a deal based on what one man wanted. And when one man wants, one man gets it, if that man is Elon Musk.”

Meanwhile, all this talk of billionaires and trillionaires has added fuel to the discourse about wealth inequality as consumers face crippling inflation as a result of the Iran war. Sen. Bernie Sanders of Vermont, a self-proclaimed Democratic Socialist, wrote on social media that Musk’s new position is “a call to action to take on the unprecedented income and wealth inequality that exists now.” And California Democratic Governor Gavin Newsom wrote on X, owned by SpaceX, that, “Americans are struggling to pay for groceries and gas while Elon Musk becomes a TRILLIONAIRE.”

Besides money, there are AI concerns. Safe AI Now, a group of technology and religious leaders, has been formed a breath-taking image of a shirtless Musk in Times Square seeking to draw attention to the company’s poor AI security record.

None of this has eased the mood on Wall Street, which has been eager to see new offerings after a historically slow period of IPOs since late 2021. When we closed the day by 19% and held firmly above the offer price, the IPO of SpaceX raised confidence in possible deals later this year from the artificial intelligence OpenAI which is an example of each Anthropic model. private market.

The old one Nasdaq CEO Robert Greifeld said he would “definitely bet” that OpenAI and Anthropic will go public in 2026. Both companies announced this month that they have filed IPO papers privately.

More than 500 million shares of SpaceX changed hands throughout the day on Friday, a number approaching Facebook’s 2012 market debut, when about 580 million shares were traded. Facebook’s IPO set a record at the time, raising $16 billion. At the end of its first day of trading, Facebook was worth about 100 billion, or twenty times SpaceX’s current market capitalization.

The biggest similarity between these two companies is that they are controlled by the founders. But even there, SpaceX is on another level. At the time of Facebook’s IPO, CEO Mark Zuckerberg controlled 56% of the voting power. For Musk at SpaceX, that number is more than 82%.

Musk is not alone in seeing a financial windfall from SpaceX’s IPO.

The offer pushed Letters of the alphabet The stake surpassed $100 billion, after the company invested about $900 million in SpaceX in 2015. Valor Equity Partners, run by Musk’s longtime friend Antonio Gracias, sits on a stake worth more than $80 billion, most of which are the firm’s clients.

In addition to institutional investors, the IPO reportedly made about 4,400 millionaires among current and former SpaceX employees.

Stock sales were led by Wall Street heavyweights Goldman Sachs again Morgan Stanleyand help from Bank of America, Citigroup, JPMorgan Chase and a long list of other major banks and retail firms. The underwriters got access to more shares, or their overlotment of green shoes, in one colorful situation.

“Only if all the bankers are wearing green shoes,” financier Steve Jurvetson, who invested in SpaceX in 2009, wrote in a post on X. Jurvetson included a photo of a pair of blue and white Nike sneakers emblazoned with the company logo.

In the morning, some of Musk’s top investors and close friends joined CNBC to talk about the historic event. Gracias was one of the guests.

The founder and CEO of Valor said he met Musk more than 20 years ago through mutual friend David Sacks, a venture capitalist who has served as President Donald Trump’s AI and crypto czar. Gracias said he invested PayPal in the “old days,” when Musk and Sacks were among the founding team, and invested in Tesla and SpaceX. In both cases, he said his company has worked on “tough problems to try to help these companies succeed.”

Gracias’ relationship with Musk goes beyond business. He spent some time last year working with Musk as part of the Trump Administration’s DOGE effort to reduce federal staffing, regulations and government spending. Gracias has also sat on the boards of Tesla and other Musk companies. As for SpaceX, Gracias said he plans to hold onto the stock “as long as I can.”

Sequoia partner Shaun Maguire, whose company invested in SpaceX in 2019, called Musk a “generational entrepreneur,” likening his planned delivery of the Starship launch vehicle to the launch of trains. He said he hoped the company could bring in hundreds of billions of dollars by 2030.

Maguire said that Sequoia will distribute some shares to investors “if we feel that the valuation exceeds its skis,” but said, “as an individual, I will hold my shares forever.”

Critics of SpaceX’s high valuation question the logic of it all. The company relies on its Starlink satellite internet service for most of its revenue and is the only profitable part of the business. But investors aren’t paying historically high multiples for broadband service, no matter how good it is.

The space launch phase burns money and relies on the Starship rocket to achieve better economics than the Falcon fleet. And the AI ​​unit, which came through Musk’s xAI acquisition, is currently a money pit based on leasing large amounts of energy to the likes of Anthropic and Google.

Financial research firm CFRA gave SpaceX a sell rating and a $115 price target, minutes after the company’s Nasdaq listing. Analysts said SpaceX has “raised the bar,” and living up to it will require proving Starship’s performance, expanding Starlink, generating returns from the AI ​​infrastructure, and ultimately generating consistent cash flow.

“Our biggest concern is that SpaceX’s long-term strategy remains very dependent on Starship,” CFRA analyst Keith Snyder wrote in a note to clients, saying the Starship rocket could be a “bottleneck” for SpaceX’s various plans.

Then there is SpaceX’s stated $28.5 trillion total market in space, communications and AI. That figure doesn’t include other lunar realities like space travel, space mining or manufacturing in orbit. And it doesn’t include transportation to Mars.

Aswath Damodaran, a finance professor at New York University, told CNBC’s “Squawk on the Street” on Friday that seeing the market value offered by SpaceX made him think the prospectus was written by Grok, an xAI chatbot, instead of a banker.

“This is a sight to behold,” Damodaran said. “I would be embarrassed to even give that number out.”

Maguire, Musk’s permabull, said he was standing next to the projection.

“I would argue that it’s an understatement,” he said.

Although Musk is the face of SpaceX, getting to this point has a lot to do with the work of Gwynne Shotwell, the company’s chief operating officer and one of its first employees.

In an exclusive interview with CNBC before the IPO, Shotwell answered the question of whether his boss would ever merge SpaceX with Tesla. It’s a possibility that has been rumored for a long time, even more so since Musk merged SpaceX with xAI after doing the same with xAI and X.

Shotwell, whose stake in SpaceX is now worth more than $2 billion, didn’t rule that out, but made it clear it wasn’t on his priority list.

“There is no doubt that there is a collaboration between Tesla and SpaceX in the future,” Shotwell told CNBC’s Morgan Brennan at Starbase. “There’s an intersection of what we’re all trying to accomplish in the future, but right now I’m focused on keeping the lights on here, keeping rockets produced, rockets flying, people flying, getting to the International Space Station, and providing broadband to people who don’t have access.”

Musk, for his part, spent plenty of time Friday seeming to enjoy the moment. As his company’s IPO dominated the news cycle, Musk was active on social media, posting messages, videos and photos from supporters showing off his company’s success. He didn’t write much, but he had one message he wanted to share with X.

“I love the amazing people of SpaceX beyond words,” he wrote.

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