“If you think that SpaceX is really worth $2.3 trillion, which is where it is today, it's because you think Elon Musk is some kind of anomalous genius. And if you don't think that, you should not be in the shares because ... it would be breaking all of the rules of finance as we know them.”
sputnikintelligence.com
The host has just read out a report that investors pitched on a $40 billion SpaceX chip financing got a two-page memo with pictures of outer space and an arrow pointing to data centers "somewhere in the universe". Foley, a financial columnist, is asked for his reaction. He prefaces this by saying he is discussing it all with a straight face.
I don't think I'm being unfair when I say that this seems unserious. Here is exactly what was reported. Quote, investors whom SpaceX has previously approached about financing its multi-billion dollar chip purchase said they only received a short two-page deal memo with pictures of outer space and an arrow pointing out that the company was going to build data centers quote somewhere in the universe. This is just an extraordinary anecdote that that is actually the pitch on a $40 billion transaction. I mean, what was your reaction? So
to be clear, although I'm discussing all this stuff with a straight face, like if you think that SpaceX is really worth $2.3 trillion, which is where it is today, it's because you think Elon Musk is some kind of anomalous genius. And if you don't think that, you should not be in the shares because there isn't like it would be breaking all of the rules of finance as we know them.
Welcome to Profit Markets. I'm Ed Elson. It is October 8th. Let's check in on yesterday's market vitals. The major indices fell from record highs as bonds sold off again. The yield on 10-year treasuries hit a new 24-year high. It later cooled off following a 10-year note auction that drew solid demand. Meanwhile, minutes from the latest Fed meeting showed another rate hike is likely this year, though it may not come until December. And finally, Brent crude remained elevated around $101 per barrel. Okay, what else has happened? Four months ago, SpaceX raised $86 billion from its IPO. Now it's looking to borrow even more. On Tuesday, the Financial Times reported that SpaceX is seeking $40 billion to buy NVIDIA chips. $30 billion will come from investment-grade bonds, and the other $10 billion will come from bank loans. Reportedly, the investors pitched on this deal got a two-page memo, which showed pictures of outer space with an arrow pointing to data centers, quote, somewhere in the universe. This is not the first time that SpaceX has borrowed big. Less than two weeks after its IPO, SpaceX sold $25 billion worth of bonds to investors, which now trade at 85 cents on the dollar. Still, the stock has been on a tear this month. SpaceX shares are up about 12% over the past week. Yesterday, the stock closed down 2%. Okay, here to break it down. We're speaking with John Foley, head of the Lex column at the Financial Times. John, thank you for joining us on Profit G Markets. So SpaceX wants to borrow $40 billion. Kind of crazy considering they raised $86 billion just four months ago. Then right after that, they issued another $25 billion worth of debt. And now they're saying that's not enough. Now we need more. Now we need $40 billion. Let's just start with your initial reactions.
Right. Well, SpaceX already has quite a bit of cash on its balance sheet because it did this IPO. It raised debt shortly afterwards. It has something like $90 billion. But what Elon Musk wants to do is build, he says, 10 gigawatts worth of data centers by the end of next year because we measure these things in gigawatts and a gigawatt costs very rough numbers, about $50 billion to build. So that would be $500 billion. So unsurprisingly, he needs more money with which to do that. So it's not totally surprising that he's now coming to the market and saying, can I have some more money? He absolutely needs that and much more if he's going to meet his goals of data centers on Earth, in space, or anywhere else in the universe.
So $500 billion, I heard that correctly, right? That's how much he would need to raise in order to achieve those goals.