Key Points
If you pay any attention to financial or business news, you’re probably aware of Space Exploration Technologies (NASDAQ: SPCX), or SpaceX, another Elon Musk company in addition to Tesla. You may also know that it launched on the stock market through an initial public offering (IPO) in mid-June.
Here we are, a few days later, and the stock is down 31% from its high of about $225 per share to a recent $154 (as of June 24). That’s kind of worrisome on its own, and on top of that, SpaceX management is planning to take on considerable debt, too. Is that enough reason to steer clear? Let’s see.
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First, know that SpaceX is focused on designing, building, and launching reusable rockets and spacecraft to take satellites and cargo into space. It also encompasses the Starlink satellite internet service and is developing the Starship spacecraft, too, aiming to be a disruptor in the space travel and exploration arenas.
SpaceX and debt: Good or bad?
Debt can be a good thing. It allows us to buy homes and new cars and even go to college. But it can also mire us in steep credit card bills — and it can put companies in precarious positions, too.
SpaceX management had noted in the company’s prospectus that “We plan to access a range of debt and equity financing solutions available to us as a public company to fund future investments in growth and to maintain strong liquidity.” One might wonder why the company is already looking to borrow funds, as it just raised $85.7 billion via its IPO.
But it was serious. The company has already raised $25 billion through a debt sale, as CNBC reported on June 23. SpaceX has said that it now has more than $100 billion in cash.
If you’re scratching your head, know this: The company took out a $20 billion bridge loan in March, which is due to be repaid by Sept. 2, 2027. So some of the company’s coffers will be tapped to pay back that loan. And the rest? Here’s a clue from the prospectus:
“We acquired xAI in February 2026, which forms the basis of our AI segment. We expect to allocate substantial capital to expand our compute infrastructure, and we expect a multiyear investment horizon before these deployments translate into sustained positive AI Segment Adjusted EBITDA… “
Anyone investing in SpaceX now should be quite confident that the company will successfully meet its artificial intelligence (AI) goals and that heavy spending will pay off with great profitability.
I’m not that confident. It could all turn out well, but the company is not even turning a profit at the moment, and it’s spending heavily on AI — as are many other companies. If it ends up borrowing more billions and/or issuing many more shares, that can hurt shareholders. Think of it like a pizza: You might own one piece of a pizza that’s cut into eight pieces. But if it’s cut into 12 pieces, each will be smaller. Similarly, stock dilution will reduce each share’s claim on the company.
Should you invest in SpaceX?
Personally, I am steering way, way clear of this stock. Here are a few reasons why:
First, its valuation is steep. Even after its recent fall, the company was worth about $2 trillion as of June 23. That’s more than Oracle, Visa, Chevron, and GE Aerospace combined. Oracle recently reported about $64 billion in annual revenue, while Chevron’s was $185 billion — and SpaceX’s was only $19 billion with a bottom line in the red.
Meanwhile, since it has no earnings, we can’t check out its price-to-earnings ratio. So instead, look at its price-to-sales revenue: As of June 23, it was 77! In contrast, look at semiconductor and AI powerhouse Nvidia — its price-to-sales ratio, also on the steep side, was just 20.
There are more reasons why you might be wary. For example, it’s posting net losses rather than gains, and it’s in a capital-intensive business that has to spend a lot on building and maintaining assets. It’s also spending heavily on AI data centers.
For me, having Elon Musk at the top of the company is not a plus, as he has shown himself to be at least somewhat erratic, with his attention spread across many directions — and now two companies — SpaceX and Tesla. He’s not the kind of leader I admire, who underpromises and overdelivers.
Let’s return to that sagging stock price now. It’s not sagging on its own. It’s sagging because investors are selling.
SpaceX could do well in the long run, and if you really want to invest in it, I’d advise waiting for a much lower price. Right now, to me, it seems a very speculative proposition. Everything would have to go right for the company for it to reward shareholders rather than disappoint them.
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Selena Maranjian has positions in Nvidia and Visa. The Motley Fool has positions in and recommends Chevron, GE Aerospace, Nvidia, Oracle, Tesla, and Visa. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
