Disappointing splashdown of SpaceX hardly seems to matter

One of the joys of being a private company â€" and the reason why Elon Musk prefers these kinds of companies â€" is that you do not have to undergo close scrutiny by, variously, the Securities and Exchange Commission, short investors, journalists, and lookie-loos. You don’t have to open your books. You don’t have to announce certain kinds of news. So even though SpaceX is an older company than Tesla, by most measures, we know less about it.

What we do know tends to come from the government agencies that buy trips on SpaceX rockets: NASA, the Air Force, and the occasional unknown government agency. Launches occur in public, of course, so screw-ups are also public. SpaceX failed to land its rocket booster on Wednesday. Does it matter?

Don your protective gear: I am about to speculate.

Private companies don’t trade in the easily observable way that public companies do. I can’t look at a stock price and say, “Gee, the water landing this week sent the stock down 15 percent, so it looks like investors are freaking the fuck out,” or “Goodness, the stock didn’t move, so SpaceX’s investors don’t seem to care at all.”

Here’s how hard it is to figure out what’s going on with private companies from the outside: no one can agree on SpaceX’s valuation. With a public company, it’s simple: you multiply the outstanding shares by their prices, and you’re done. With a private company like SpaceX, you have to estimate. In April, CNBC reported that estimates ranged from $25 billion to $27 billion; Bloomberg pegged it at $28 billion in October, while The Wall Street Journal said it’s worth “more than $20 billion.” The consensus seems to be the WSJ’s line â€" the disagreement is by how much more than $20 billion SpaceX is worth.

SpaceX’s revenue is about $2.5 billion a year, according to The Wall Street Journal, which cites “industry officials” as sources. That suggests, at least to me, that the numbers aren’t coming directly from the company, implying a level of guesswork. The company is profitable, SpaceX president Gwynne Shotwell told CNBC in May. “We’ve had many years of profitability,” she said. “The years that are financially rough for us are the years where we have issues.” But I don’t know how profitable, and I can’t pull any forms to find out. Complicating matters is that Bloomberg’s reporting on SpaceX’s recent loan suggests that the company hasn’t been profitable in the 12 months before September. (It’s in the final paragraph if you’ve clicked over to look.) This is sourced to “people with knowledge of the matter,” which might be bankers who saw the paperwork.

That makes it harder for me to figure out whether the failed landing matters to SpaceX financially. I have limited information; I don’t know how trustworthy some of it is, and I’m not entirely sure where it’s coming from. For a public company like Tesla, this information is disclosed quarterly in filings.

Here’s my speculation: the water landing likely doesn’t matter much. Remember, landing the boosters have always been a secondary objective for SpaceX. Musk’s public comments suggest he thinks this booster can be recovered after this landing. (Though previously, a booster that made a splashdown had to be destroyed.) And since SpaceX flew and landed a booster for the third time â€" also this week â€" it’s at least possible that the recovered booster from Wednesday could fly again.

But on a corporate level, the fact that SpaceX is private means it can be much choosier about its investors than Tesla can be. Those investors are instructed to have “a very long time horizon” for a return, Robert Hilmer, global head of business development at Equidate (a specialized firm that analyzes private companies), told CNBC in April. “Elon told me: ‘Are you ready to not see a return for 15 years,’ and I said, ‘Yes, of course,’” said Laetitia Garriott de Cayeux, a venture capitalist and SpaceX investor who spoke at a 2017 conference, according to CNBC. It is also harder, though not impossible, to trade shares of privately held companies, so there are likely to be fewer panicked sellers.

What Shotwell was talking about when she mentioned issues were a series of high-profile rocket explosions: one in 2015 and one in 2016, both of which delayed SpaceX’s other planned launches. (There was an explosion in 2017 as well, but it didn’t require the company to halt its launches because it was (1) just an engine and (2) on a test stand.)

Read more: https://www.theverge.com/2018/12/7/18129539/spacex-falcon-9-rocket-water-landing-valuation-investors
https://adstoppi.com/blog/disappointing-splashdown-of-spacex-hardly-seems-to-matter
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