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Certainly one of the biggest stories around the markets recently was the IPO for SpaceX.
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The stock started selling at $150 a share and by the end of the day had posted a valuation of around
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$2 trillion and in the process made Elon Musk the first trillionaire ever to take us through
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what we saw happen and what it means for SpaceX and maybe even the markets going forward.
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Pleasure to be joined by Wharton Professor David Suh, Professor of Management here at the school.
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David, great to have you joining us. Thanks for a couple of moments today. No, thank you, Dan.
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What was your take on the entire process? Because I think a lot of people are trying to still
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grasp the concept of this being a company that is so valuable when it's an area that is still
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so much kind of in into the forward as to what we'll see happen in it. No, absolutely. And I think that is contributing to the enthusiasm and just in terms of really
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this excitement around the space economy, new ways of providing communication, the intelligence
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layer with the XAI. It's really, in some ways, three companies rolled into one and there's
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various forward looking and eye popping aspects of this company. So really, that was this $2 trillion valuation highly celebrated. We'll see if that lasts.
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So is the valuation probably on point in terms of what we could potentially see moving forward
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in the next 20, 30, 40 years in all of those different areas that you just mentioned?
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I think it is. The truth of the matter is that really no one knows with certainty whether a
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$2 trillion valuation is in some ways correct. I think that there's certainly the part of the
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business that is in some ways easiest to value is the Starlink because of the track record,
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though, of course, they hope that business rapidly scales. The other two parts of the business
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are a little bit less easy to value. XAI probably the most difficult. But certainly with the
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rocket launch business subject to what happens in the space economy, those contracts with the
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U.S. government, et cetera, et cetera. But a lot of enthusiasm now about the prospects going forward.
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We'll see what happens over the coming months, years, decades with respect to these lines of
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business. And we still have a ways to go with the space economy. But at least what we've seen in
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the last decade or so, Elon Musk and SpaceX have done a great job kind of leading the way
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in this sector moving forward. No, absolutely. I think that's part of the track record, both in many of his companies. They're very science fiction almost. This one is
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probably the most notable one. And so I think the enthusiasm and as tracked in the valuation,
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there's an unmistakable Elon Musk premium here because the amount of engineering,
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the amount of science development in his companies has been pretty astonishing. And
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the fact that he has the track record really kind of bolsters everyone's confidence in this space
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as well. Are those the main reasons why seemingly there is this belief in when Elon Musk starts to
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put something together, that it's going to have a level of success? I think there is, you know, I think that is certainly a part of it because no one ever
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dreamt that reusable rockets could be a thing. They had taken for granted that that's just off
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the table. And I think time and again, he's able to really put forward companies that
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seem quite speculative at first, but is somehow able to, I mean, not every single company, but
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there's enough track record here of several companies have been able to do this. I think
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together paired with the story of the excitement going forward of the communication,
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the transportation, and then the intelligence layer. Again, these three companies rolled into
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one really, I think, is the reason why we're seeing this blockbuster valuation. And there's already some conversation about whether or not SpaceX and Tesla should merge
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at some point. What are your thoughts on that? My sense is that that introduces a lot of complexity.
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I think that perhaps there is a bit of synergy and technology leadership, but I think that the
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customers are sufficiently different. If you thought about the customers for the vehicles
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versus the different lines of business of SpaceX, those are largely non-overlapping.
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And so investors can already buy through the public markets these two stocks separately.
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And so it's not clear that this conglomerate structure really unlocks a great deal of
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synergy that would justify any meaningful premium to these companies separately. In fact,
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makes it a little bit more, again, we already have three companies in one in SpaceX to add
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another giant company on top of that. It's not clear that that makes a huge amount of sense
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at this point. What do you think this means potentially longer term for the other companies
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that are in this space? You know, certainly there are others like Blue Origin that have,
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you know, tried to, you know, get their ships up into space. There are other components,
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you mentioned Starlink, other companies are trying to do, you know, satellite work as well.
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Is this larger scale a great thing for the industry as a whole, or does this give Elon Musk
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more dominance in this space moving forward? Yeah, I mean, not surprisingly, when an entrepreneur
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finds something successful and is working as demanded by the market, there's going to be
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new entry on that. Blue Origin is a strong competitor in various aspects, not quite as
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advanced, but certainly it's good for consumers that there's not just a single provider here.
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And I think the good news is really fleshing out the ecosystem more broadly on different
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components of the space economy. I'd like to think about the space economy as like space for Earth
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and space for space. And I think the first aspect here is space for Earth. That's what we're
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seeing. But I think as the decades roll by, thinking about, you know, other aspects,
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complementary aspects of attracting participants in the ecosystem in both the sectors of space
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for Earth and space for space, I think will be good overall in terms of new growth areas,
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et cetera. What's been your thought about having the space economy in more of a privatized
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territory? Because obviously you and I are old enough to remember the days of when it was
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a function of the government for the longest period of time. And to a degree, it still is,
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but it has really taken a different turn with companies like SpaceX, like Blue Origin,
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and others really taking the lead the last couple of decades. Yeah, I think that's astonishing for everybody that, you know, the premise in the 70s, 80s,
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et cetera, is very much this, you know, who's going to invest in the private sector on something
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that's so speculative, so far out there, so capital intensive. And so really these companies have
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flipped the script because not only did they put in the private sector incentives and discipline,
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but they're getting traction and they're getting customers who are the government.
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And so that is quite astonishing that they've been able to make this work commercially because
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I think many had prior beliefs that there's no way that this could be really privatized and
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work commercially under the umbrella of a private sector company. But, you know, of course, it's far
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from generating net profits, but there seems to be a pathway together with the market discipline
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associated with private actor efforts on this. And that just seems to be the way forward now
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in terms of adjusting everyone's preconceived notion about how things should be done in the
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sector. One final question for you. A lot of people have talked over the years about
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with Elon Musk, is he taking on too much? This would certainly add to that level, but it does
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seem like Elon Musk is one of those individuals who is able to put forth a lot of energy on a lot
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of different fronts at the same time and still be able to parse the importance of all of these components.
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Dan, I think that this is why he's worth 1.1 or 1.2 trillion dollars and we are not.
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Like, there's a clear separation here in his capacity to found, to, you know, really
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just operate this incredible span of companies. And so he doesn't seem like he is. He's, you know,
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certainly cut from a different cloth. He has very ambitious. I mean, that's an understatement
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right there. But he's able to really have that vision, you know, really forward looking on
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these things and then really, you know, sweat the details and, you know, make it really happen. And
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so he's an extraordinary individual. And just that daylight between him versus this now the second
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most valuable, you know, that that daylight's getting broader. And so I think that's also
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returning to our first question. Part of the extraordinary valuation here is very much tied
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into the individual. David, great to talk to you. Thank you for your insight as well.
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Thank you so much, Dan. Take care. You got it. David Siu, Wharton Management Professor.