SpaceX investors beware: Musk's Mars plan may be pie in the sky - AOL

Elon Musk's space empire is going public in the biggest share offering of all time. A company valuation of $1.75tn (£1.3tn) will hand $75bn to Space Exploration Technologies Corporation, as SpaceX likes to be known.

The magnificent rockets are Musk's greatest achievement, and last week it announced its biggest yet, Starship 3, along with a glossy share prospectus. Sending things into orbit used to be a premium, boutique operation. SpaceX has turned it into a bus service by proving you don't have to throw away the entire rocket each time it is launched.

By 2024, SpaceX was launching more rockets than everyone else in the world combined, and dominated the market even more by volume of material launched. It has also allowed Musk to create a global telecoms company, Starlink, which is the one part that consistently generates cash.

The glossy prospectus reminds us, however, SpaceX is not a cash cow. Not only did it lose nearly $5bn last year, but is now under pressure from mounting competition.

The US government is seemingly growing wary of its dependency on one very volatile tycoon.The mammoth Starship rocket was designed for missions like the Artemis programme. However, Nasa also chose a consortium to work alongside it, made up of Boeing and Lockheed Martin, and Airbus.

"SpaceX is the only company that has cracked the code on accessing space at scale," the prospectus boasts, but that is no longer true.

The New Glenn rocket from Jeff Bezos's Blue Origin is also designed to be reusable, and can carry a greater payload than SpaceX's trusty workhorse, Falcon Heavy.

The newer Starship can carry twice as much as New Glenn, but it's still a work in progress. It then needs to be refuelled once in orbit. The United States is building up rivals where it can, with Blue Origin also being given the contract for a lunar lander alongside SpaceX.

And today, there are engineer entrepreneurs doing to Musk what Musk once did to the complacent incumbents like Boeing. The most exciting of these is Peter Beck's Rocket Lab, with over 80 missions completed, and eight so far this year. Japan's JAXA space agency and defence ministry are using them.

"The space race has only just started," says one industry veteran. "I'm confident that by 2030, the competitors will be just as good."

Starship has had some high profile failures but the Starlink department needs it to work, as the IPO prospectus tells us: "Our current operational rockets, including Falcon 9 and Falcon Heavy, are not capable of deploying [Starlink] V3 satellites and V2 Mobile satellites."

Then there's money. It is worth recalling that Musk was reluctant to float SpaceX because it imperilled his goal of reaching Mars.

"I am hesitant to foist being public on SpaceX, especially given the long term nature of our mission," he emailed his employees in 2013. How things change. Now he just needs the cash, and fast.

Even with its technological lead and healthy 70pc margins, the launch business is not a terribly lucrative market. It's the Starlink division that generates real cash flow with over 9,600 satellites and more than 10 million global customers. The satellites don't last long, however, because of the friction of a low Earth orbit, and the fleet needs to be constantly replenished.

Musk has encumbered SpaceX with his xAI venture, which develops the Grok AI, which almost nobody wants to use, and Twitter, now X. AI is incinerating cash at an astonishing rate. This means SpaceX is likely to burn through the capital raised from the IPO very rapidly.

Elsewhere, the SpaceX prospectus waxes lyrical about the potential of data centres in space. Musk argues that energy is free once in space as solar panels can keep power-hungry chips running. Overall, SpaceX claims enterprise computing is an addressable market worth $22.7tn, roughly the size of the entire digital economy today. Yet this isn't credible.

And YouTube science channels are full of elementary physics lessons about the difficulty of cooling a hot object. One of then demonstrates how difficult it is to disperse heat through a vacuum by explaining that it would take a human body a day to freeze in space, despite the "outside" temperature out of sunlight being -270C. Millions of square meters of panels are therefore needed for an typically-sized data centre. With computing becoming a commodity, it's an absurd proposition.

However, there certainly are wonderful commercial opportunities in space. For example, our own SpaceForge puts tiny factories into orbit to produce materials of such quality they can't be grown economically on Earth. But space tourism and asteroid mining - both mentioned in the IPO brochure - are either very small markets, or very far away.

SpaceX rhapsodises about its mission "to make life multiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars".

But the reality may be far from it. Investors beware.