The SpaceX IPO is a trillion-dollar gamble on the future of space

The great SpaceX IPO is looming, allowing outside investors — including regular Joe Schmoes, or retail investors — to buy a stake in one of the buzziest and most controversial companies on the planet for the first time. Depending on who you ask, it’s either the best investment opportunity you’ll see this decade or a fool’s errand to rip off credulous Musk fanboys. With valuations of the company going to sky-high levels, over $1 trillion according to some estimates, there’s certainly a furor around the potential for rich returns.

But is there really any money to be made in space?

Let’s be clear: There are plenty of companies making money right now by providing space services. From Earth observation satellites to communications to launch services, there already exists a whole ecosystem of companies working in low Earth orbit, providing invaluable services to people on the ground.

Where the question gets trickier is when we start to look at the economics of launching humans into space, or sending missions to the Moon or beyond into deep space. These are SpaceX’s stated aims — or at least, the loudly stated aims of Elon Musk, so it’s reasonable to assume that’s where the company has set its long-term sights. And SpaceX is the dominant force in the space economy right now, so if anyone can make this work, it can. There have been suggestions that there’s money to be made in mining asteroids, or extracting rare earth elements from the Moon, or performing drug research in microgravity, but there is vigorous debate among experts over the business cases for these plans.

It’s essentially just very, very expensive to do anything in space, with costs ballooning due to the price of a ride on a rocket, the extremely high level of reliability and safety needed for any hardware that you launch, the weight constraints, lack of opportunity for maintenance, and the need to secure power and shield from space radiation. That’s all without mentioning the astronomically higher costs that come when humans are being launched as well. It’s much cheaper to do your work on the ground, whether it’s research or resource extraction.

In practice, it’s unlikely that anything you could dig up from an asteroid, for example, would justify the cost of sending a mission there right now. Take NASA’s OSIRIS-REx mission, which traveled to an asteroid to acquire a sample and bring it back to Earth for scientific purposes. It cost over $1 billion and was a decades-long undertaking of tremendous engineering skill and expertise that succeeded — impressively — at returning around 120 grams of material. Even in the case where an asteroid is known to be made of potentially valuable metals, even if a mission were purpose-built for the goal of mining and did manage to return and land those metals safely on Earth, trying to flog huge quantities of those metals would likely lessen their value anyway as the market became flooded.

Then there is the new crop of up-and-coming space economy ideas, like AI data centers in space or space-based solar power. These are technologies that work on Earth, and could theoretically be made to work in space, with their affordability aided as the price of doing anything in space drops as technologies and markets mature. The justification is that data centers gobble up electricity and water for cooling, using up power and creating pollution, but if they were in space then they could take advantage of plentiful solar energy and cooler ambient temperatures — though experts warn that the issues of space debris and orbital overcrowding are a risk, and that emissions of infrared radiation could interfere with astronomy. So could a company make money in these enterprises? Potentially. Has any company got a concrete plan for how to do it yet? Nope.

Some of the teething problems of space commercialization can be seen in NASA’s uncertainty over the future of the International Space Station. Now old and outdated, the ISS will need to be deorbited in the next few years, and the plan was to replace it with a number of different commercial space stations. NASA would financially support the development of these stations, then become a customer of them, sending its astronauts on stints there to perform the same space research the agency has always done.

At least, that was the plan. Progress on the commercial space stations was slow, and last month NASA pivoted to an entirely different approach due to a limited budget. The hope had been that private space stations could be funded by space tourism and other commercial ventures, but that source of revenue isn’t looking as promising as it once was: Joel Montalbano, acting associate administrator for NASA’s Space Operations Mission Directorate, acknowledged that NASA had expected the space tourism market to take off and pump money into the sector, but that had failed to materialize. Now, the fate of humans in space is up in the air.

There’s a warning there. The promise of money to be made in space tourism “is actually somewhat emblematic of this larger discussion,” says Wendy Whitman Cobb of the School of Advanced Air and Space Studies. For all the optimistic projections about the forthcoming space economy, “there’s a real question as to whether that market actually materializes or not.”

First, companies were going to pay to conduct research in microgravity. Then, millionaires were going to save us by booking joy rides into space for fun. Now, we’re going to solve the resource-gobbling problems of AI by shoving data centers into space. Some of these ideas could eventually turn a profit, but it’s far from clear that any of them will generate enough money to pay the enormous costs of doing anything off Earth.

For SpaceX, though, the company doesn’t need to make money in any one particular aspect of the space economy. It has its fingers in enough pies, from launch to satellite internet to xAI, that the gamble is on whether at least some of these enterprises will make enough money to cover the rest.

“That’s part of what this is a bet on as well, which is that the market will come up with more business cases we can’t foresee,” says Matthew C. Weinzierl, a professor at Harvard Business School. “(SpaceX) have such a dominant position in the sector, that to the extent people believe there’s at least a reasonable chance that the pie in space is gonna get really big, SpaceX is going to claim an enormous share of that pie. Because they’re creating it in many ways.”

And to a significant degree, the question of whether there’s money to be made in space is a question of timescales. “In a thousand years, do I think there will be a vibrant space economy? Yes, I do. I think we should probably count on that. But that’s a long time,” says Weinzierl.

In the more immediate term, there’s not necessarily a business case for space beyond low Earth orbit right now. “Short of some sort of technological or scientific breakthrough, in the next five to 10 years, I’m skeptical,” says Whitman Cobb.

Government contracts will continue to be a significant if not the primary source of revenue for most space companies, which could bridge the gap between the short- and long-term views of space economics. There are space services that exist now and are in successful use, from launch providers like SpaceX’s Falcon 9 rocket to Earth observation services like those from Planet and Vantor (previously Maxar).

SpaceX services including the use of Starlink and the Falcon 9 are now deeply intertwined with the US defense sector, to an extent that has some lawmakers concerned, but that offers the company a degree of stability. Whether there’s peace or war on Earth, defense contractors stand to make good money.

“The national security piece gives you sort of a floor below which it’s hard to imagine SpaceX falling,” says Weinzierl. For investors, he says, that makes it an appealing choice, especially for those looking to get into the sometimes risky world of space investment: “If you want to be a part of space, (SpaceX) feels in many ways like the safest bet.”

The importance of government contracts for space companies isn’t new, points out Marit Undseth of the Organisation for Economic Co-operation and Development (OECD). But compared to legacy space companies like Boeing, Lockheed Martin, or Northrop Grumman, the difference is the degree to which SpaceX has vertical integration.

“What we have now is that SpaceX controls launch, even manufacturing. It has a unique position in the space industry, and even in the space economy,” Undseth says. But with this prominent role can come a higher degree of scrutiny: “It’s the government’s role to ensure that there’s competition at all possible levels, and to adjust the advantages of incumbents and first movers.”

Because that first mover advantage is real and significant. With loose regulation around the use of space, there is a degree of first-come-first-served when it comes to cornering the market on certain orbital positions or parts of the spectrum. SpaceX has a big leg up over competitors from having gotten there first.

As for a push for more regulation in the space market, that’s “a very touchy subject,” Undseth says, and there isn’t clear agreement between differing nations, NGOs, or companies on what reasonable regulation would look like. “Everybody understands the need for competition, but it’s also very difficult to put that into practice.”

Then there’s a question of how becoming a public company with heavy reliance on defense contracts will affect SpaceX in the long term. The company has built its reputation and success on being willing and able to test, fail, and iterate again, and on not being afraid of controversy or of pouring money into projects like Starship that may never really be financially viable on their own. Will stockholders accept that approach once their own money is on the line?

“The defense contractors we have here in the United States have become incredibly risk-averse,” says Whitman Cobb. “Can SpaceX retain its unique organizational culture as one that is innovative and focused on the future? … Are they going to be able to retain what makes them a unique and special company by going public?”

It’s hard to speculate on the financial future of SpaceX because the company is so opaque from the outside. It says it is making money from Starlink, but how much? How much is Starship costing to develop, and how is it going to make that money back? How reliant is the company on government contracts, and is there really a market for its services that can make it financially independent?

No one knows. But the IPO will at least give experts a chance to finally see inside the company’s financials. “I personally can’t wait for the IPO,” says Whitman Cobb. “Not to buy it, but just to get some more insight on what SpaceX looks like as an actual company.”

So what are the potential investors in SpaceX buying? A meme stock? A piece of the future of the human race? A defense contractor run by an unstable and highly distractible leader?

Whatever the truth turns out to be, people who are thinking of putting money into SpaceX presumably know what they are getting into. “Markets can be impatient for quarterly earnings, and they really want you to hit your targets,” Weinzierl says. But “anybody buying into SpaceX has to understand that’s not the asset they’re buying.”