▲ SpaceX
Just ten days after its record-breaking initial public offering (IPO), Elon Musk's SpaceX is making its debut in the bond market, sparking controversy over the "generous assessments" by credit rating agencies.
Moody's Ratings assigned a Baa1 rating to SpaceX's corporate bonds on June 18 (local time), Bloomberg News reported on Tuesday, June 23.
This is the eighth highest of the 10 investment-grade steps (Aaa to Baa3) and is two notches above speculative grade (junk bonds).
This places SpaceX in the same tier as large, stable consumer goods companies like Starbucks and Lowe's.
It is also two notches higher than Tesla (Baa3), another company led by Musk.
According to other foreign media reports, S&P Global Ratings assigned SpaceX a BBB rating, one notch lower than Moody's, while Fitch Ratings gave it a BBB+, matching Moody's equivalent rating.
The issue is that SpaceX's financial health is not in ideal shape.
When Moody's first assigned a Baa1 rating to Nvidia nearly a decade ago, Nvidia was a company that had been public for 16 years and had free cash flow exceeding $1 billion.
In contrast, SpaceX has limited public financial records and is in a state of "sustained negative free cash flow."
S&P expects SpaceX to remain cash-flow negative until 2030, with its borrowings projected to swell to $132 billion (approximately 202.8 trillion won) by 2028.
Considering that its current net debt is virtually zero, this projection suggests that its debt will increase by hundreds of trillions of won in just over two years.
Sal Naro, chief investment officer (CIO) of Coherence Credit Strategies, pointed out, "On the equity side, this is going to be an amazing opportunity over the next 10 to 20 years." However, he added, "On the fixed-income side, it feels like the rating agencies are giving a lot of leeway and a very positive outlook to events that are going to happen in the near-to-medium term."
Despite these concerns, investor funds are pouring into SpaceX's first corporate bond offering of $20 billion (approximately 30.7 trillion won), which could be issued as early as Tuesday, June 23.
The primary purpose is to repay a bridge loan (short-term borrowing) taken out last March to refinance debt for social media platform X and xAI, with the remainder slated to fund business expansion spanning reusable rockets, the Starlink satellite network, AI, and space data centers.
Early indications suggest that the yield on the 10-year tranche is expected to be set at around 130 to 135 basis points (1 bp = 0.01 percentage point) above the benchmark rate.
The reason investors are reaching for these bonds is SpaceX's unrivaled business structure.
Moody's cited SpaceX's position as the world's largest launch provider—having transported more than 80% of global orbital launch mass since 2023—and its operation of Starlink, the largest low-Earth orbit satellite network, as the basis for its rating.
As of June 4, Starlink has 12 million subscribers.
Ross Pamphilon, CIO for fixed income at Impax Asset Management, stated that he is considering participating in the bond sale, but noted, "The way we look at it, you've got a deeply free-cashflow negative sort of business with a strong AI cash burn that's xAI, bolted onto your strong franchise in satellite, that's Starlink." He added, "And then you've got the grand vision around space data centers, connectivity... all of which is admirable. But clearly, it requires a bit of a leap of faith."
John Lloyd, a portfolio manager and global head of multisector credit at Janus Henderson Investors, said, "A lot of the near term capex is going into things that are going to realize returns pretty quickly." He added, "If Musk accomplishes 75% of what he sets out to do, then the credit gets upgraded and they look like one of the hyperscalers."
(Photo: AP, Yonhap News)
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