SpaceX’s shares dropped by 16% on Monday, marking the third consecutive day of decline, following reports that the company may begin significant borrowing.
After a strong initial public offering earlier this month, SpaceX disclosed on Monday in regulatory documents its intention to issue investment grade bonds. The aim is to secure around $20 billion in funding through this bond issuance, which could support long-term projects like costly AI development and even the construction of data centers in space.
Besides the senior unsecured notes, the filing also revealed that the company possesses roughly $100.8 billion in cash.
The stock closed at $154.60, giving SpaceX a market value of $2.03 trillion. This follows declines of more than 8% earlier in the week before the U.S. markets shut for the weekend.
SpaceX is now among the tech giants opting for debt to finance their ambitious AI projects. Recently, companies like Alphabet, Amazon, and Nvidia also expressed plans to engage with the bond markets.
“Investors are understandably cautious about these debt offerings, especially amidst this AI arms race,” remarked Dan Ives, managing director at Wedbush Securities. “There’s a noticeable uptick in debt and equity initiatives from major tech firms aiming to ramp up capital investment over the upcoming years.”
SpaceX achieved a record IPO on June 12, making Elon Musk the first billionaire, raising nearly $86 billion. The initial share price was set at $150, quickly catapulting the company’s valuation beyond $2 trillion, with stocks climbing 19.6% to close at $192.45.
Retail investors contributed to the stock’s early momentum, purchasing $405 million in shares during the first five trading sessions, according to Vanda Research. Notably, retail interest in SpaceX last week surpassed that of the entire Magnificent Seven cohort.
By transforming the space industry with its reusable rocket technology, SpaceX has notably lowered the costs associated with satellite launches. The Texas-based firm also operates the satellite internet provider Starlink, which has evolved into a significant government contractor over recent years; it’s expected to be the primary source of revenue by 2025. Musk has ambitious plans for SpaceX, which he believes will one day facilitate human colonization of Mars.
Back in February, Musk integrated SpaceX with his AI company, xAI.
However, SpaceX is also facing financial challenges as it rapidly depletes cash reserves. Last year, the company experienced losses nearing $5 billion while incurring annual capital costs of $20.7 billion.
In just the first quarter of this year, SpaceX’s expenditures reached $10.1 billion, with AI representing $7.7 billion of that, far surpassing the $4.1 billion spent in the same quarter of the previous year.
A Kingsview Wealth Management partner, Scott Martin, previously noted that investor enthusiasm for SpaceX stock is largely driven by confidence in Musk rather than the company’s current financial performance.
“Investors are not focused on today’s fundamentals; they’re banking on the potential dominance of Elon Musk, Starlink, AI, space infrastructure, and SpaceX in a future industry that’s still taking shape. It’s thrilling, but it also sets the bar incredibly high for expectations.”
