IPO hopes and dreams: why iconic shortstop Jim Chanos doesn't believe SpaceX's valuation

SpaceX's scheduled June 12 debut is fueled by investor enthusiasm for Elon Musk and artificial intelligence rather than the aerospace company's financial performance, according to noted Wall Street short-seller and founder of investment firm Chanos & Co. Jim Chanos. In his opinion, the high assessment of SpaceX is difficult to justify any reasonable forecasts for the development of the company's business, writes Bloomberg.

SpaceX's listing will be a key test of market sentiment at a time when investors are pouring huge sums of money into speculative growth stories, Chanos said at the iConnections Global Alts investment conference in New York. The company's offering is one of the most anticipated stock market debuts in history, with demand more than four times the number of available securities, sources told Bloomberg.

"SpaceX is going to IPO for $75 billion at a total valuation of about $2 trillion, and we're talking about a company with $19 billion in revenue and negative free cash flow. This is in purest form an IPO of hopes and dreams," said the legendary shortstop.

He emphasized that SpaceX's estimated value reflects expectations of future business directions, which are still largely theoretical. "The potential market for the space industry is endless," Chanos said ironically. - To justify that valuation, you can make up any story you want - colonies on Mars, factories on the moon, data centers in orbit."

Chanos compared the premium to what he believes SpaceX's real value is to the premium investors place on the stock of Musk's other company, electric car maker Tesla. Its market capitalization has long been supported by a bet on unmanned driving projects, robotics and AI. At the same time, the short-seller points out that SpaceX enters the market with a much higher multiple: while Tesla's price is about 14 projected annual revenues, SpaceX enters the market with a multiple of 90.

Chanos believes its existing businesses, including satellite internet service Starlink, fit the "couple hundred billion dollar" valuation. At the same time, he did not claim that he would immediately open a short position in SpaceX shares.

- Cathie Wood, founder of ARK Invest, expects strong demand for SpaceX shares after the listing. She considers the technological potential of the Starship rocket to be the main driver of the company's valuation. ARK predicts that successful deployment of the launch system will reduce the cost of putting cargo into orbit tenfold - and this will expand several SpaceX markets at once, including orbital data centers, which Musk is announcing could indeed become commercially viable and even compete with terrestrial infrastructure for AI.

- Gene Munster, managing partner of the Deepwater Asset Management fund, believes that the market is underestimating the effect of Elon Musk's assets. In his opinion, the integration of space infrastructure and xAI computing power allowed SpaceX to "assemble the only set of assets capable of creating a fully sovereign AI", i.e. a fully autonomous ecosystem independent of third-party vendors.

- Aswath Damodaran, a professor at New York University who has been called a "valuation guru," believes the company should be worth about $1.2-1.3 trillion - below the level it is targeting. He admitted that SpaceX's valuation of the space launch and satellite communications market looks plausible to him, but he found the projection of a potential $26 trillion AI market to be too optimistic. Such a scenario would require almost complete replacement of the workforce with artificial intelligence.

This article was AI-translated and verified by a human editor