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Why SpaceX desperately needs a government bailout

20 points by dankohn1 7y ago

xkjkls 7y ago
As long as they don't save the equity holders or bondholders in the process, I'm fine with that. The company is a financial disaster, but is currently contracted for some essential work.
toomuchtodo 7y ago
I'm not so sure the author's thesis holds water. During SpaceX's funding round last month, they raised $500M [1], $250M more than they were seeking (raise when you can!). Also, while the author disagrees with StarLink's expectation of access to the FCC’s Rural Digital Opportunity Fund auction funds, I would hazard a guess that the FCC's business friendly modus operandi under the current administration would not require such a strict interpretation that only a terrestrial network would be eligible for access to those funds (even if StarLink can reallocate capacity across the globe on the fly). NASA and the DOD also seem fond of the work SpaceX is doing (ISS CRS [2], recent Lunar Gateway contract win [3], and the DoD funding a StarLink proof of concept [4] for high bandwidth low latency comms for fighter aircraft); the government dollars are likely to continue to flow. Elon is no stranger to cutting fast and deep when necessary (see: Tesla, multiple times). If SpaceX was in peril, I very much doubt Musk would be unable to raise (again from CNBC: “It’s one of the most valuable private companies in the world and, with consistently oversubscribed capital raises, SpaceX shares rank among the most in demand of any pre-IPO companies.”), even accounting for the market's recent high volatility and turmoil. I also don't see the OneWeb bankruptcy as reducing SpaceX's $36B valuation; it leaves one less global comms competitor in the race. Sidenote: The FCC should require ground station telemetry reporting to the FCC on a frequent cadence to ensure end users are receiving the throughput and capacity StarLink is committing to by obtaining FCC RDOF funds, but that's a discussion for another thread. [1] https://www.cnbc.com/2020/03/09/spacex-raising-500-million-in-new-funding-for-elon-musks-company.html https://www.cnbc.com/2020/03/09/spacex-raising-500-million-i... [2] https://en.wikipedia.org/wiki/Commercial_Resupply_Services https://en.wikipedia.org/wiki/Commercial_Resupply_Services [3] https://www.engadget.com/2020-03-28-nasa-spacex-lunar-gateway-cargo.html https://www.engadget.com/2020-03-28-nasa-spacex-lunar-gatewa... [4] https://spacenews.com/air-force-enthusiastic-about-commercial-leo-broadband-after-successful-tests/ https://spacenews.com/air-force-enthusiastic-about-commercia...
- _curious_ 7y ago
  fair push-back on a fascinating topic, thanks for sharing.
- cjhopman 7y ago
  > During SpaceX's funding round last month, they raised $500M [1], $250M more than they were seeking (raise when you can!). This was addressed in the article. While they initially claimed they wanted only $250M, they actually approved and tried to raise $500M. I don't know where you got the idea that they actually raised that much, they failed to hit their goal and were only able to raise $221M.
  - toomuchtodo 7y ago
    Thanks for correcting me on the latest round information ($221M raised versus $500M authorized)! I believe the rest of my comment still stands as it relates to their business prospects.
azernik 7y ago
I'm unclear why the author sees the collapse of OneWeb as a bearish sign for SpaceX; this is a competitor falling away, leaving Starlink with only Amazon's recently-founded Kuiper as competition. COVID-19 is indeed a challenge, as it is for the rest of the economy, but it's not particularly more affected than any other business. In terms of cash flow, it may be somewhat insulated by the advance deposits that the article describes as a kind of numerical gimmick; SpaceX can and is still landing contracts for future activity, even while some launches have been delayed, meaning there's still some cash flow even if it goes partially idle for a few months. This resilience, of course, requires the customers who put down money for future launches to have healthy cash flow themselves. Since those customers are mostly telecommunications corps and governments, I don't foresee them running into cash flow issues. They'll still be awarding contracts based on long-term prospects.
- new_realist 7y ago
  SpaceX is wasting resources questing for Mars, and satellite launches are the ultimate in discretionary spending—not popular in these uncertain times.
  - senectus1 7y ago
    its a stretch goal. you watch them fill the void with what they learn from stretching.
  - azernik 7y ago
    Let's look at the SpaceX launch manifest for the next year (not counting Starlink), to get a look at what their cash flow comes from: - 6 military (US, South Korea, Germany) - 6 commercial telecommunications - 4 ISS cargo and crew transport - 1 astrophysics - 1 scientific earth observation - 1 tech demonstration - 1 rideshare of a bunch of cubesats Only those last four would I classify as "discretionary spending" - military spending is quite immune to the present crisis, telecoms is if anything more important than ever, and the ISS support is necessary to maintain an enormous capital investment. I think you have a mental image of the launch market looking mostly like those last four, when in fact that's a small minority of the market. (And of those four, two are of the institutional research category that gets budgeted and contracted years in advance; a 1-year crisis isn't going to have much effect on budgeting decisions for 2022 and onward.)
areoform 7y ago
I am slightly surprised by this story, mostly because I've heard that Luke Nosek quit his job at Founder's Fund to start a fund, Gigafund http://www.gigafund.com http://www.gigafund.com , with just one company in mind - SpaceX. They've led their rounds since their formation. However, my information might be out of date or wrong. Nosek's Gigafund is one of the more interesting funds out there with their incredibly focused thesis and the amount of money they're looking to put into one single company.

20 points by dankohn1 7y ago

As long as they don't save the equity holders or bondholders in the process, I'm fine with that. The company is a financial disaster, but is currently contracted for some essential work.

toomuchtodo 7y ago

I'm not so sure the author's thesis holds water. During SpaceX's funding round last month, they raised $500M [1], $250M more than they were seeking (raise when you can!). Also, while the author disagrees with StarLink's expectation of access to the FCC’s Rural Digital Opportunity Fund auction funds, I would hazard a guess that the FCC's business friendly modus operandi under the current administration would not require such a strict interpretation that only a terrestrial network would be eligible for access to those funds (even if StarLink can reallocate capacity across the globe on the fly). NASA and the DOD also seem fond of the work SpaceX is doing (ISS CRS [2], recent Lunar Gateway contract win [3], and the DoD funding a StarLink proof of concept [4] for high bandwidth low latency comms for fighter aircraft); the government dollars are likely to continue to flow. Elon is no stranger to cutting fast and deep when necessary (see: Tesla, multiple times). If SpaceX was in peril, I very much doubt Musk would be unable to raise (again from CNBC: “It’s one of the most valuable private companies in the world and, with consistently oversubscribed capital raises, SpaceX shares rank among the most in demand of any pre-IPO companies.”), even accounting for the market's recent high volatility and turmoil. I also don't see the OneWeb bankruptcy as reducing SpaceX's $36B valuation; it leaves one less global comms competitor in the race. Sidenote: The FCC should require ground station telemetry reporting to the FCC on a frequent cadence to ensure end users are receiving the throughput and capacity StarLink is committing to by obtaining FCC RDOF funds, but that's a discussion for another thread. [1] https://www.cnbc.com/2020/03/09/spacex-raising-500-million-in-new-funding-for-elon-musks-company.html https://www.cnbc.com/2020/03/09/spacex-raising-500-million-i... [2] https://en.wikipedia.org/wiki/Commercial_Resupply_Services https://en.wikipedia.org/wiki/Commercial_Resupply_Services [3] https://www.engadget.com/2020-03-28-nasa-spacex-lunar-gateway-cargo.html https://www.engadget.com/2020-03-28-nasa-spacex-lunar-gatewa... [4] https://spacenews.com/air-force-enthusiastic-about-commercial-leo-broadband-after-successful-tests/ https://spacenews.com/air-force-enthusiastic-about-commercia...

_curious_ 7y ago
fair push-back on a fascinating topic, thanks for sharing.
cjhopman 7y ago
> During SpaceX's funding round last month, they raised $500M [1], $250M more than they were seeking (raise when you can!). This was addressed in the article. While they initially claimed they wanted only $250M, they actually approved and tried to raise $500M. I don't know where you got the idea that they actually raised that much, they failed to hit their goal and were only able to raise $221M.
- toomuchtodo 7y ago
  Thanks for correcting me on the latest round information ($221M raised versus $500M authorized)! I believe the rest of my comment still stands as it relates to their business prospects.

azernik 7y ago

I'm unclear why the author sees the collapse of OneWeb as a bearish sign for SpaceX; this is a competitor falling away, leaving Starlink with only Amazon's recently-founded Kuiper as competition. COVID-19 is indeed a challenge, as it is for the rest of the economy, but it's not particularly more affected than any other business. In terms of cash flow, it may be somewhat insulated by the advance deposits that the article describes as a kind of numerical gimmick; SpaceX can and is still landing contracts for future activity, even while some launches have been delayed, meaning there's still some cash flow even if it goes partially idle for a few months. This resilience, of course, requires the customers who put down money for future launches to have healthy cash flow themselves. Since those customers are mostly telecommunications corps and governments, I don't foresee them running into cash flow issues. They'll still be awarding contracts based on long-term prospects.

new_realist 7y ago
SpaceX is wasting resources questing for Mars, and satellite launches are the ultimate in discretionary spending—not popular in these uncertain times.
- senectus1 7y ago
  its a stretch goal. you watch them fill the void with what they learn from stretching.
- azernik 7y ago
  Let's look at the SpaceX launch manifest for the next year (not counting Starlink), to get a look at what their cash flow comes from: - 6 military (US, South Korea, Germany) - 6 commercial telecommunications - 4 ISS cargo and crew transport - 1 astrophysics - 1 scientific earth observation - 1 tech demonstration - 1 rideshare of a bunch of cubesats Only those last four would I classify as "discretionary spending" - military spending is quite immune to the present crisis, telecoms is if anything more important than ever, and the ISS support is necessary to maintain an enormous capital investment. I think you have a mental image of the launch market looking mostly like those last four, when in fact that's a small minority of the market. (And of those four, two are of the institutional research category that gets budgeted and contracted years in advance; a 1-year crisis isn't going to have much effect on budgeting decisions for 2022 and onward.)

areoform 7y ago

I am slightly surprised by this story, mostly because I've heard that Luke Nosek quit his job at Founder's Fund to start a fund, Gigafund http://www.gigafund.com http://www.gigafund.com , with just one company in mind - SpaceX. They've led their rounds since their formation. However, my information might be out of date or wrong. Nosek's Gigafund is one of the more interesting funds out there with their incredibly focused thesis and the amount of money they're looking to put into one single company.