The Numbers are in: A Post-Prospectus SpaceX Valuation!

0:00 Hi, welcome back. A few weeks ago, I valued SpaceX ahead of its IPO. But at that time, the prospectus had not come out and my valuation was based on what I would call drabs of data. Uh little information about revenues, a few rumors about Ebida and perhaps a glimmer of hope on on share count. But at that time I promised I would come back to revisit the valuation when the prospectors was made public. Well, now the prospectus is public and I plan to revalue SpaceX in this session with the information of the prospectors.

0:38 In the process though I want to talk about the value of having access to financial statements and how that value can shift across a company's life cycle. how it can be different inveing a young company with growth potential like SpaceX as opposed to a mature company. So let's get the process started. A few couple of years ago I did write a paper on what I call the disclosure diarrhea, the disclosure dilemma if you prefer more polite language that that we face with public financial statements and in particular with prospectors. I compared the prospectuses that we've seen for companies that have gone public in the last decade to the prospectuses we saw for Apple and Microsoft in the 1980s and argued that prospectuses have become much deeper much much more bloated and much of the data that you see in there is really not information it's not particularly useful to just give you a contrast both the Microsoft and the Apple prospectives is well less than a 100 pages long. The prospectuses that we've seen for Uber and Airbnb have been hundreds of pages. And in keeping with that bloating, the SpaceX prospect is weighed in at 277 pages with an addendum that rents another adds another 100 pages. It's full of pictures and distractions and lots of weak links, but there is information there. So, what I'd like to do actually is take the prospectors and look at the data in the prospectors and see how it changes my valuation. I'm going to start with the number section, the easiest section, things like revenues and operating income and debt and cash, things I did not have data for a few weeks ago without the prospectors that I have data for and bring them into the process. But I think the more critical part is, is there information in the prospectors that leads me to change my story line for SpaceX? because after all this is a company whose value is driven by the story line. So let's start with the numbers. If you look at the operating numbers and look at my estimates pre-prospectors and look at what the prospect has delivered, the numbers are actually pretty close. My revenues on launch and sterling for instance are very close to the actual numbers. the numbers on XAI came in much higher than I thought and part of the reason for that I is I hadn't counted in some of the least revenues they're getting from leasing out compute space. So if there's any surprise there is that the revenues in X turned out to be much larger than my estimate. In the aggregate though I estimated the company would report an operating loss of about 2 billion. It actually reported a slightly larger loss 2.6 billion. So in the aggregate there's really not much surprising other than perhaps X AI coming in higher than expected. Now looking at the balance sheet there are a few numbers that I did not have at the time of original valuation that at first first side look like they should change the value but I'm going to argue will not the first is my book value of equity which was 20 billion in my estimate was and at that point was completely a guess. It turned out to be about turned out to be much the actual book equity turned out to be higher 41.3 billion. The debt number came in at 22.9 billion. Now let me be clear 3 weeks ago I knew SpaceX had borrowed money. I just know how much. It looks like it borrowed about 23 billion.

4:09 You think that's a large number. Shouldn't it change a valuation? Well, in my original pre-roector's valuation, I also did not know how much cash the company had. And I'd zeroed it out. It turns out that the company is almost 25 billion in cash. If you look at the net debt number, it turns out that the net debt number is actually negative. Cash exceeds death. The effect in value, especially when you're talking about the 1.2 trillion in value that I get for the company, is almost um rounding error. So neither the operating numbers nor the financing numbers had much of a change in my overall value. It is true that I was able to update my share count. The way I got my share count in the [clears throat] pre-prospector's valuation was by dividing the estimated market cap that people were talking about for a for SpaceX as a private company and dividing by the private market share price. You know, my account was about 2.5 billion shares. You it's now clear that the company's going to have a split. It's going to be about 12.5 billion shares. But let's be clear, that share count does not include the new shares that will be issued in the IPO in the offering and it does not include the restricted stock held by employees. But my guess is the actual share count is going to end up above 13 13 billion shares. But for the moment, I'm going to go with what we know. It is estimated and as I was finishing this session I got the news story that the number is going to be close to 75 billion 74.4 billion and the prospect is also specifies and this is critical for my valuation that the company plans to hold the cash and meet it for operating needs. You know you're saying what other choice do you have? You know companies can have IPO offerings where the cash raise actually goes to owners of companies. Spotify did this where cash went through the company. This allows me to clarify how I should be dealing with the cash raise. In additional information, the prospectus, [clears throat] there's information on corporate governance. The the prospector specifies that there will be about 6.9 billion class A shares with one vote per share and 5.6 billion class B shares with 10 votes per share. with Elon Musk holding pretty much all of the class B shares. Effectively, he will control 85% of the voting rights. Now, I had guessed pre-processed that this would be an Elon Musk vehicle, and this kind of reinforces that with the with with numbers to show that it will be an Elon Musk vehicle. As I said, the prospectus is longed and filled with distraction, but to be honest, there was almost nothing in the prospectus that surprised me in terms of numbers. So you know basically reinforce the point that SpaceX is a growing company that is money losing and cash burning and I knew that before the prospectors came out and it's growing at least in the aggregate and that ultimately this will be an Elon Musk vehicle. So that's the numbers part. Let's turn to what I think is the more interesting story line. Now when I originally valued SpaceX, I said this is a company where the value is going to come not from [clears throat and cough] from data the numbers and number crunching but from the story you tell.

7:29 And that story has three dimensions. The first is target revenues which are driven by how big you think the market is going to be and the market share you think SpaceX will have. The reinvestment you need to get that growth that's going to come from how capital intensive the business is and what lag there is between when you invest and when you start to see revenues and the target operating margin the profitability part of the story which is going to be driven by unit economics and e economies of scale. It's kind of a generic picture of what drives valuation stories. Now of course in my pre-prospector this valuation I told a story for three different business and added on a fourth component for expansion options for launch business originally story line was that SpaceX would be a dominant player and get a 70% market share of hundred billion market that was my total addressable market that gave me revenues of 70 billion and I saw this as a good business a profitable business gave it high margins and assume that they would need to reinvest to keep growing. Those satellites will need to get keep getting the they'll have to upgrade you know they've gone to the starship but they have to upgrade those those rockets every few years. So that my reinvestment reflected that the Starling business is their is the what they call their communicate the the the internet portion of the business has built off the launch business because they have so many satellites in space. They're a market leader in satellite broadband. But I did in my story line argue that it remains a niche market of a much larger broadband market which is 1.6 trillion but I saw this the the satellite broadband as only 10%. That gave me revenues of 120 billion as a target revenue. Very high profitability because once you got those satellites into space, every new subscriber you sign on is pure profit.

9:24 And because they have 10,000 satellites in space, I argue that the reinvestment is going to be relatively low. So they can get lot lots of growth based on what they've already done. with XAI. My original story was that they would stay focused on the consumer subscription part rather than in the business um services part and that because they would say subscription focused their target revenues would would reflect that niche market 80 billion and their operating margin would reflect the fact that this is in fact a fairly attractive business to be in 45% margins. So the sales to capital ratio w will reflect the fact that this is a capital intensive business and then I said each of these three businesses their expansion options with the launch business it's to Mars I think it's going to be that's going to be a niche market travel for the for the Starling business it is that technology will improve enough that satellite broadband will compete with fiber optic and and the alternative broadbands that we're now dependent on in much of the and AI. Of course, there are all these side businesses you could get into. I gave it a relatively modest target revenue of 50 billion and and pretty good profitability in that business. My so my original valuation of 1.21 trillion and you can see that my original post reflected these story lines. So what I'd like to do is take each of the story lines and look at the prospect to ste to see what might have changed in the story line. So let's start with my target revenue part and in the prospect is we now have details about the actual revenues by business and how much they grow. There's good news and bad news. The good news is in the aggregate SpaceX saw revenues grow about 33% in 2025.

11:16 But here's the mix of news. If you look at their space launch business the revenue growth was relatively modest. It's not growing at you know 30 40 50%. was growing at 8 at about 8%. Their connectivity business was their satellite um internet is the fastest growing business. It's also the biggest slice of revenues. It's carrying the company grow at 50% and XAI delivered about a 22% growth in revenues in 2025. So you can see both the composition of the company. It's p primarily a connectivity company now and the fact is that there is a growth component but the growth is coming from the connectivity AI businesses not from the space launch business. Now as an additional component the prospectors also reports total addressable markets. Now before I go into the numbers, I have to tell you that this is a number that has been gained by Silicon Valley because they've recognized, at least they being companies going public, companies raising capital have recognized that if you put a big total addressable market out there for investors to look at, it dazzles them. They kind of stop asking questions. Just to give you some background, in 2019 when Uber went public, uh Uber's prospectus claimed that the total addressable market for Uber was 5.2 trillion, which is absolute fantasy cuz the way you get to 5.2 trillion is is they took everything that everybody spent on transportation from buying your car to taking public transport. Definitely not the total addressable market for for Uber, but it's a number that they throw out there.

12:54 With Airbnb, the total addressable market was 3.5 trillion, six times larger than the collective revenues of hotels last year. I know Airbnb might increase the number of people who who go out the hospitality business, but not by that magnitude. So I was interested in how far how much the overreach would be with SpaceX and I was not disappointed. According to the prospectors, the total addressable market for SpaceX is $28 trillion. You miss me? $28 trillion.

13:27 Just to give you a sense of what that means, the collective revenues for all global companies last year 2020 25 was about 140 trillion. 27 trillion is 28 trillion is a mind-boggling number. It's know much larger than almost every economy out there in ter. So let's step back and see where they get the 28 trillion on space. They had 370 billion as the total addressable market. If you remember my total addressable market was 100 billion cuz I don't see that 370 billion out there. But know what do I know? I don't know much about space launches anyway. On the connectivity business their total market addressable market is about 1.6 6 trillion which actually is my estimate for all of the internet business but I assume that satellite internet would be 10% of that market. It's on AI that they've really gone to town. The collective total addressable market for AI according to the prospectives is 26 trillion with a big chunk of it 22.7 trillion coming from enterprise solutions.

14:39 Now clearly there is overreach there but there's also a message I'm getting from the prospectors that cuts against my original storyline. If you remember in my original story line I assumed that XI would stay focused in the consumer market. Clearly that's not the intent that they're going after the enterprise solutions market and they see it potentially as a market across multiple businesses and covering huge ranges of of of services. So here's what I'm going to do. I'm going to take what I see in the historic growth and and revisit my numbers on my launch and connectivity business. You know what?

15:18 I'm going to stay with my original total addressable market. I think um that uh the bankers are counting for example in the internet the total internet business as the market and I don't think that's the case if you're looking at satellite internet on XAI. I disagree with the 26 trillion that they see as the potential market, but I need to listen to the story here. The story line here that comes from what they're telling me as well as their acquisition of Cursard suggests that they plan to go head on into the much bigger business services market and I will adjust for that by doubling my target revenue. I, you know, it's a much bigger market and as I will note later, this comes with with catches. It'll create some consequences that are negative, but the positive, it's a much bigger market. And I do think that the total addressable market for AI products and services is huge.

16:15 It's just not 26 trillion. It's closer to 3 to 4 trillion, which is a huge market to begin with. Now, in profitability, the question is, did I, you know, is there something in the financial statements that tells me something about profitability? I'm going to start with looking at the traditional numbers in the financial statements to get a sense of unit economics. What is unit economics? Unity economics measure how much you make on the next unit you sell. And if you look at the numbers here from 2024 and 2025 and the advantages, the prospectors did break them down. The space business and the connectivity business look good. They have great unit economics and they're improving. Just to give you a sense, you know, the gross margin, which measures how much of every dollar in revenue you get to keep after the cost of the product to deliver for the space business went from about 59.4% to almost 67%.

17:14 Now, for the connectivity business, which is Starlink business, the gross margin was not as good in 2024, 37% but went to 48%. So clearly there's good news for those two business. On the XAI business, which starts off with the least attractive gross margin in 2024, the gross margin actually decreased. The unit economics for XAI are not just worse than the other two businesses, they're getting even worse. And there's two reasons for it. one is this is the one the [clears throat] one the of all of their three businesses this is the business where they're most exposed to competition where the pricing is going to be more cutthroat and the cost of delivering AI and we've seen these in news stories about you know you know AI agents and how much it costs to actually deliver the kinds of things that AI agents go looking for that cost is rising and it's not you know it's not going to be easily scale down even though every AI company claims it can.

18:18 So there is there's information here about profitability that I've got to factor in. And there's additional information the prospectors that can help us tweak the profitability numbers on the space launch business. For instance, the cost of launching payloads has decreased over time. Now you know whether it's Falcon 9 or the new Starship, clearly the the company's moving in the right direction. their cost advantage over the competition which is already large will potentially get larger. On the connectivity business, there's a mix of bad news and good news. Let me give you the bad news first. The monthly revenues per subscriber went from almost $100 a month in 2024 to $66 a month in 2020, the first quarter of 2026. That's almost a third drop, right? You're you're saying, "Well, that's bad news." Well, here's the good news. the number of subscribers has doubled and in fact that total revenues has gone up and you saw that with the 49% growth in 2025 and I would argue that if your endgame for um satellite internet is that you are going to go after this very large internet service business this is good news that you're able to charge less and bring in a lot more in subscribers and make up for your lower prices. So I think that the the net news is good on this front.

19:40 On the AI business, there's not much to go on on profitability because much of what you talk about is about compute capacity and draw. The only thing is there was a new story that you know that some of you might have read and the prospectus you know mentions is about Colossus which is the AI compute center that XAI controls which was leased out to anthropic for 1.25 25 billion a month which is going to be a big revenue generator next year. In the long term though it is there is the potential for tension that's going to be created if XAI is going after an after is competing with Enthropic for the business services but at least for the moment there is this near-term revenue that's going to come from that.

20:26 So here's my profitability story updated my the unit economics for the space business I think are going to improve. So my original operating margin of 40% I'm going to increase to 45%. So the news and the prospect is about improving margins there tilted the scales. I will leave the target margin for the connectivity business at 60%. It's well above what the margin is today. But I think as it scales up you're going to see that margin kind of keep moving up on XAI. I think the two forces that are that cause margins to shrink in 2025, increased competition and the higher cost of delivering AI products and services, those are not going to go away. those dynamics will continue to put pressure downward and I think that you know I have to bring that into account and if there's the the big there's one number that the if the biggest impact if you ask me what what of all of the prospective change which one the biggest the biggest change I think is the fact that my operating margin that I'm going to use the target margin has gone from 45 to 25%. Now think of this as the the dark side of going after the more intense the bigger business services market. I think if a if XAI stayed with the niche market and provide subscription services to a subset of consumers maybe they could gotten away with much higher margin. Now that they've decided to go head on again um into the into the much bigger market, I think it's going to come with a consequence of lower margins. Finally, on the reinvestment front, the prospectors provides the specifics again going into the prospectus. I knew that XAI that that SpaceX was reinvesting a lot, but the prospectus puts numbers that kind of jump out at you. The first is the total capital expenditure of the company doubled in 2025 with a big chunk of it coming from a AI. The R&D expense more than doubled in 2025. Again, with a big chunk coming from AI. As you can see, the common theme here is they're reinvesting a lot and much of that reinvestment is coming from AI. And that lets me finish out my story. So in my original reinvestment story, if you remember, I didn't reinvest very much in the space launch and connectivity business. Given what I saw in 2025, I think I might have undersshot the reinvestment. So I did increase reinvestment in the new years, but not by a huge margin. With XAI though, the fact that I'm projecting out a much bigger target market, much higher revenues is going to translate into a much bigger reinvestment. So if you look at the whole picture of what the AI the my change in the AI story has done, it's made my story bigger but coming with potentially lower profitability and much more reinvestment. So let's summarize how this is going to play out in terms of inputs that I'm going to use to value SpaceX post prospectus for the space and the connectivity business. Not much change in uh or no change at all in the target market. higher margins for the space business based on the unit economics and for both those businesses more reinvestment in the first five years based on the capex and R&D that I've seen in the prospectors on the AI business though big shift much bigger target market because they're going after business services 160 billion but with consequences lower margins because it's a much more competitive business with higher costs and I have shifted the reinvestment up front more reinvestment by using a lower sales gap ratio. The expansion business I've kind of left as is. With those changes put in, here's what I get as my value. I won't bore you with the details, but you can see that my end revenues are going to be much higher. My weighted operating margin of the company is lower partly because AI is dragging it down. It is going to become more AI as a company as it goes through time less and that's going to put a drag on profits and require reinvestment. If you notice much more negative free cash flows based on my estimates they will need about know 13.5 billion in cash flows to keep their capital expenditures going. The bottom line though is that this is a company now that is know company but more of a shift towards the AI component. Now in terms of the cost of capital if you remember my original valuation my cost of capital was close to 8%. Now since that valuation the T-bond rate base rate for you know pushes up across all discount rates has gone from about 4.2% to 4.56%.

25:19 That 36 basis point jump in the treasury in the T- bond rate is causing my cost of capital to go up from 8% to about 8.37% for the next 10 years and then to 8.25% beyond. Those are the changes and if you put those changes through the value that I get for the operating assets is about 1.22 trillion. If you compare this to my original valuation 1.21 21 trillion almost unchanged right not because there is there are pluses and minuses things I've done to make the value higher bigger market for AI things that I've done that the net effect not not that much but the fact is the 75 billion you're going to get from the offering is now going to stay in the firm increases my cash balance while also increasing the share count because I have to issue shares to raise the 75 billion net effect is I get a value of about $100 I wrote the entire post whether you believe me or not and it's in your hands before I heard the I read the news story yesterday evening as I was putting these slides together that uh the bankers had priced the company at 135 per share roughly 1.8 day trade it. As I said, you could have seen that coming 100 miles away, you know, but based on my valuation, the 135 looks a little too rich. We'll talk about what I plan to do with it and what you might want to do with it, but that's where I stand after the prospectus. Now, if you look across the company, look at the biggest change, it's coming from the AI space. And as I said the prospective suggests that the company is going after a much bigger AI market. And to me this rema this is now the biggest risk I would face as an investor if I had shares in the company.

27:08 The risk of overreach in the AI space. What does that mean? To the extent that SpaceX, you know, SpaceX overestimates the size of the AI market that they really think the total addressment market is tens of trillions of dollars. that they overestimate their own competitive position in that market, that they can beat anthropic and open AI in that market and spend on capex and R&D based on those beliefs. There's a risk here that they could invest so much in the AI business that they could drag the entire company down. Of course, this concern is heightened by the fact that this is going to be a company which is an autocracy. This is not this is not a corporate democracy. the voting share structure basically leaves this Elon Musk company and much as I admire the man for his um for his imagination his capacity to change businesses he is you know he's set he he he has his own I mean he's going to go wherever his mind asked him to go and my concern here in particular is if this becomes a fight between XAI and open AI and anthropic especially with X with open AI and Sam Alman man running the company that this might become the equivalent of a UFC fight match between Elon Musk and Sam Sam Alman. Two monstrous egos fighting it out in the AI space using shareholder money to kind of fund that fight. That would be what scares me as an investor.

28:39 Now, as you look at the prospectus and the value that I have for for for SpaceX, you might wonder why was there so little change? Aren't financial statements central to valuation? And in fact, if you look at valuation and the way it's evolved through from Ben Graham all the way through today, it's been centered on financial statements. And that's that centrality has just become more intense as data has become more accessible and our tools have become more powerful. In fact, much of what passes for valuation today is really financial modeling where you take historical data and you extrapolate each line item based on historical patterns.

29:19 No, I think and then you compute ratios by doing what paying one number in a financial statement dividing by another number. I know that sounds incredibly crude, but every ratio, that's basically what you do. And especially with numbers like return on equity and capital, purely accounting numbers, they become ways of screening companies for investment quality. Now, I I'm I'm not going to argue that this is always bad. There might be companies with his works, but the SpaceX prospect is a case study of why doing this not just myopic, but it's often misleading and why the informationational value of financial statements will shift depending on the kind of company you're value. I'm going to go back to a construct you've seen me use before corporate life cycle and if you're interested I have papers post book a book on it and essentially I talk about how as companies hey is the kinds of questions that you need to answer to value the company shift so in very early in the life cycle it's about you know will the is this product even buildable is there a market out there and then it shifts to unity economics and cost dynamics and then you start thinking about revenue growth rates and reinvestment ment needed to get them.

30:29 And as you move through time, it's only with mature companies that you shift your attention to margins and accounting returns. And in terms of you know the key the ownership what you need to know that two shifts early on. You say who's running the company? What are the exit plans? Who's the founder? And as you go through the ownership structure starts to matter less and less. Now if you keep this these questions in mind you can already see that financial statements the what you get out of them will be different depending on where you're in the life cycle you know because if you look at the traditional you know bottom line in financial statements the earnings of a company even the level of revenues or accounting returns early on those numbers are kind of meaningless in a in a young company because there's not much there often money losing companies they Now not because they're bad companies but because of move that's where they're in the life cycle their book their returns and equity are are can be huge negative numbers excess returns are meaningless because they're still searching for a mode. It's only as you go through mature companies that the traditional focus on looking at what the income is and what the accounting returns are starts to shift. Now if you think about SpaceX uh the three businesses they're all early in the life cycle young growth and high growth and consequently if you look at what I use from the prospect is that changed the value it wasn't the aggregate revenues or the or the operating income that the company had neither of which looked that good in 2025 but what I learned about unit economics and capital intensity you know because there is a mix of good and bad news and the prospect is on those factors but those are the things that matter. Now if you I if you think about good and bad reasons to avoid SpaceX now this the financial statement perspective is a particular there will be people out there who will make a case against SpaceX because it's a money losing company. It has negative cash flows and I think that's both lazy and unconvincing. Why? Because of course it's a money losing company and of course it has negative cash flows and of course the revenues are small but that's because it's a young company. If you want to make a case against investing in SpaceX, it should be built on the fact that we're perhaps overestimating the target markets for the businesses that comparative pressures will drive margins down or even that you don't like the corporate governance structure. Now if that's you know and if you make that case recognize that you don't have a monopoly on the truth. you have a case to make but there other people who might disagree with you and those disagreements are both natural and healthy in markets. So if uh if I were to summarize what I've discovered know basically based on my story and my numbers I think SpaceX with the inflow from the IPO is going to be worth about 1.25 maybe 1.3 trillion which is an astonishing number if you step back. I mean, no company in history other than a Ramco has ever gone public with a market cap that high. But I'm not going to argue with you if you say it's worth three trillion because you might have a much bigger st story or or conversely, if you tell me it's worth only a half a trillion, hey, that tells you it's not my job to convince you that I am right because I don't know that I'm right.

33:53 It's my story. My decisions are driven by it. You got to come up with your own story and your own decisions. Now to kind of um get a sense of what you should do, I think it's worth looking at the process, the IPO process and look at the different players because you can almost pre you know you can you can preview what's coming based on their motives. If you look at a traditional IPO, which is what SpaceX is going through, the process starts by going out and finding banks. and SpaceX of course is a whole syndicate of banks and then you file a prospect as what has happened. Then you have a pricing which the banks get together and they put a pricing and then they're selling and marketing. Now used to be the banks would do it and then the banks offer a price guarantee. Don't get too excited.

34:43 Sounds exciting but it's not as exciting or as great as it sounds. And then you provide aftermarket support. That's basically the banker's role as you go through the the process. As you look at those steps and you think about bankers in the SpaceX IPO, you can already see no let me stay on this page why the banking role is going to be much much smaller in SpaceX. First timing timing reflects the fact that bankers supposedly are good at timing markets by now. You know that's a delusion. We know that bankers especially look at market strategies coming from investment bankers they have no idea where the market is going. So the timing advantage is gone. You're saying what about the prospectors that requires knowing how to do it. You know what as I read the prospectus for SpaceX I kept asking myself is was this written by the bankers or was this written by Grock?

35:35 Because I mean it's you know checking boxes. It's very very very boilerplate. The entire sections can be reproduced by looking at past prospectuses. But so the role of bankers here is not that great. Grog could have done it. You say what about the pricing? The SpaceX had to be priced. The key word is pricing. You know there is this illusion that bankers value companies. They don't. They price them. And how do they price them? By looking at past pricing. You're saying but it's a private company. What pass pricing? In the case of most small private companies, it's VC pricing. In the case of SpaceX, the advantage bankers had is this is a pre-priced IPO.

36:14 There's a market out there that 2 months ago gave a signal that the company is worth about 1.2 to 1.25 trillion. All bankers will then do it at a premium based on the fact that this is going to be a public company. There's cash coming in less failure risk and know at the time two months ago I'd have guessed about 1.5 to2 trillion would be the IPO pricing. were pretty much there, right? In fact, my guess is that they priced it at around 2 trillion, you know, based on what? Based on feel. And um they discounted that price. Why? Because they're offering a price guarantee. We know it's pretty much in every IPO rule book that you price a company and underpric it. So, what about the selling and marketing?

37:00 There might have been a time when you needed investment bankers because nobody recognized your name. you're a small private company. No, that's not the case with SpaceX. What's selling and marketing? I would wager that Elon Musk with a tweet can do most selling and marketing and all the bankers getting on their phones and trying to convince institutional investors. And as for aftermarket support, now aftermarket support means that stock drops below a certain level, the bankers will come in and support the stock price. There's no way they can do that with a SpaceX. They don't have the capital to support a $2 trillion stock price. So my question is why did SpaceX even need the bankers? And that has to be a factor when they negotiate fees. In fact, I would argue and I don't think this will happen, but I would argue at SpaceX that maybe the bankers should be paying them rather than them paying the bankers because they live in the reflected glory. Is know you're saying what choice that or does SpaceX have?

38:01 they could gone for have gone for a direct listing. In fact, I think the only good reason for not going for a direct listing here is they wanted the cash to hold aside for their capex and they have a lot of it. And it's still much more difficult, if not impossible to do it with a direct listing than with the traditional status quo. So, the bankers are going to do their kabuki dance, but it looks like they've done this big analysis and research, but the 1.8 8 trillion. You could have called that a m a mile as I said a month ago or two months ago as a number that was coming. You're saying what about SpaceX as an issuing company? There are benefits from going public. First is you know for the owners of the company in its private form the venture capitalists have gotten early the more public market investors who got more recent years going public allows them to cash out you know albeit after the lockout period expires. So that's good. The company itself having that 75 billion will be nice to cover the capex in the near term and given that they have these big plans for AI. I think that's good to have that access to capital and for Elon Musk I think you know this is the potential for making him the first trillionaire in history and who knows what drives Elon I mean at this point I don't think it's just money I think you know but and so there's pluses here are there minuses obviously because many of these pluses have been around for a few years and SpaceX stayed private one is as a public company you now have disclosure requirements whether you like it or not, you got to make those earnings reports and earnings calls and that's going to be something that they did not have to do as a private company. And the second is you are catering to the market and the market is fickle. Today it might think AI is the greatest thing on the face of the earth and give you a high price. Tomorrow it might change its mind. You got to live with that market pricing being public and answering questions about why did your market price drop 40% in the last year.

40:01 Now as for um investors you know I first want to draw a cont contrast between investors and traders. Investors value a company buy it if the price is less than the value or maybe sell it if the price is higher than the value. Traders buy a company at a price because they expect to sell at a higher price. Why does the price go higher? Doesn't matter. It could be mood. It could be momentum. It could be some kind of information. No.

40:24 Now much of the market is composed of traders and investing is hard. I mean I am more investor than trader but I'm not passing any value judgments. Ultimately the way you get judged is based on how much return you make, how much you make on your investment. So whether you're a trader or an investor, that's the end game. I'm just not a very good trader. So I stick with the investing game because that's where I think I might have some kind of edge. You know, my valuation of SpaceX reflects my story and my value. You know, my my and the 1.25 25 to 1.3 trillion that you see is lower than the $1.8 trillion pricing.

41:01 It's too richly priced. I would not be buying in the IPO. Does that mean I will never buy SpaceX? That would be a crazy thing to say because let's face it, prices can change. I remember Facebook going public and 2012 at a, you know, $36 offering price. And at that time, I posted and I said, "This looks rich to me. I'm not buying it." I came up with 28 $29 per share. Just 3 months later in September of 2012, the stock was trading at 18. It had become a buy. Uber when it went public in 2019 looked overpriced to me. And then a year later, you know, [clears throat] as COVID kicked in, the stock had dropped to $14 per share. Now, am I saying SpaceX is going to drop to 800 billion? I no, but it could happen, right? So, you know, I wouldn't buy the stock at the IPO price. No, you say, why aren't you selling short? I'll talk about that in a moment when when I talk about the traders. Now, if you're a trader, as I said, you buy the shares because you expect the price to keep going up. What causes prices to move is not so much fundamentals, but it's mood and momentum. And if the mood is good, you know, my guess is that, you know, if the mood is, you know, gauged right, the offer will be at one point the the company will open at 1.8 trillion jump to what? 2 trillion, 2.2 trillion.

42:25 That's the nature of initial pricing if the mood stays good. But we also know momentum can shift quickly. So if you're a trader, not only do you need to get in in the offering, even if you think it's going to go up, you need to get out at the right time. It's all about timing and that's what I said I'm not good at it. But if you're good at it, this could be a very the trading will drive the price up and down. And it's also the reason why I'm not selling short because you can be right about intrinsic value, but mood and momentum are the dominant forces. You could be right about the company being overvalued, but it'll still go up. So, I'm going to sit on the sidelines for the IPO and watch, you know, but what you do will depend whether you're an investor or a trader and if you're an investor, what your value judgment is. So, as uh the IP the offering date gets closer, you're going to prepare yourself for a wave of selling from the company and its bankers. I'm going to tell you all the amazing things about AI and dazzle you $28 trillion total addressable markets.

43:29 At the same time, I can guarantee you there'll be a flood of talk from people who believe that this is a scam, that the company is worth much less than than what it's going public for. And of course, it'll also bring out those people who don't like like Elon Musk and they dislike him enough that they assume that any company starts has to be worth nothing. Now I'm not, you know, as you look at these perspectives and you gauge them.

43:56 I, you know, my suggestion is it's buyerware that you need to check the numbers for plausibility, but you know, no matter what the name is the person pushing for or against SpaceX, it's your money. You need to take ownership and for that you have to make your own judgment on value. Now for the bankers, the I think the biggest risk is timing. I mean things can change on the drop of a hat. I mean they set the offering price yesterday. They were coming off two great months for the stock market but who knows a month from now when the actual offering date arrives what that momentum will look like. No, no matter what how you frame this valuation though it is SpaceX is a loaded bet loaded bet on what loaded bet on AI how big the market will be how it'll form how profitable it'll be what the competition is going to look like and on Elon Musk I know that might terrify some people but at the same time there are other people who've made that bet on electric cars and Elon Musk with Tesla and look at how well they've done so I think that we're going to see this um IPO play out in interesting ways and I hope to be a spectator there and talk about things that happen and perhaps write about them as they happen. I thank you very much for listening.