{"id":9206,"date":"2023-12-24T06:50:48","date_gmt":"2023-12-24T06:50:48","guid":{"rendered":"https:\/\/topat10.com\/?p=9206"},"modified":"2023-12-24T06:50:48","modified_gmt":"2023-12-24T06:50:48","slug":"elon-musk-says-at-spacex-we-never-think-about-the-quarter-and-hes-in-no-rush-to-spin-off-starlink-given-the-tremendous-distraction-of-being-public-like-tesla","status":"publish","type":"post","link":"https:\/\/topat10.com\/?p=9206","title":{"rendered":"Elon Musk says at SpaceX 'we never think about the quarter'\u2014and he's in no rush to spin off Starlink given the 'tremendous distraction' of being public like Tesla"},"content":{"rendered":"\n

The space business and public markets are not, perhaps, a match made in heaven. Consider the much-anticipated Starlink IPO. Elon Musk\u2019s SpaceX<\/a> is the most valuable private company in the U.S., and its largest revenue driver by far is Starlink, which offers broadband connections around the globe via a constellation of low-Earth orbit satellites.<\/p>\n

\n

But Musk is in no hurry to spin off Starlink, despite excitement over the idea. A big reason why? The advantages of being a private company versus a public one.<\/p>\n

\u201cAt SpaceX, we never think about the quarter. We never think about it, and we don\u2019t think about the stock price,\u201d Musk said this week during a Spaces conversation<\/a> hosted by ARK Investment Management CEO Cathie Wood.<\/p>\n

As he knows from leading Tesla<\/a>, there\u2019s \u201cimmense pressure on a public company to not have a bad quarter. So this can actually result in a less efficient operation, where you\u2019re going to great lengths at the end of a quarter to not disappoint people.\u201d<\/p>\n

The SpaceX advantage<\/h2>\n

Asked if he can better take appropriate risks with SpaceX than Tesla because the former is private, Musk replied, \u201cAbsolutely.\u201d\u00a0<\/p>\n

SpaceX has quickly become the dominant launch provider, and Starlink is well ahead of its future rivals, notably Amazon\u2019s Project Kuiper<\/a>. The company has started talks to sell insider shares at a price that puts its valuation at close to $180 billion, Bloomberg reported<\/a> on Dec. 12.<\/p>\n

Speculation on the timing of a Starlink spinoff IPO now ranges from late 2024 to 2027, though last month Musk denied<\/a> that it would happen next year. In January, venture capitalist Chamath Palihapitiya predicted that Starlink<\/a> would go public this year and that its valuation would \u201cbe at least half of SpaceX\u2019s current private worth,\u201d which at the time was about $150 billion.<\/p>\n

Starlink revenue surged from $222 million in 2021 to $1.4 billion last year, the Wall Street Journal<\/em> reported<\/a> in September. But that\u2019s low considering that eight years ago SpaceX projected $12 billion in revenue in 2022. Last month, Musk announced<\/a> that Starlink had achieved break-even cash flow.<\/p>\n

Starlink has more than 5,000 satellites in operation and the service has surpassed 2 million active users, according to SpaceX; meanwhile, the popular retailer Costco<\/a> recently began selling<\/a> its receivers.<\/p>\n

But, Musk said this week, \u201cI don\u2019t think it\u2019s worth going public until you have maybe an extremely stable and predictable revenue stream. At that point, going public is less of an issue because you\u2019re just not going to have these big gyrations.\u201d\u00a0<\/p>\n

In the meantime, Musk has little problem<\/a> luring venture capitalists to invest in SpaceX given his track record, and he welcomes them. \u201cIf others are prepared to invest at a particular value\u2026it\u2019s sort of an outside assessment of the value of the company,\u201d noted the world\u2019s richest man.<\/p>\n

Getting satellites into space, of course, is wildly expensive, and the payoff can take some time. Ashlee Vance, who wrote a 2017 book<\/a> about Musk, told the billionaire earlier this year that he sometimes questions whether the Starlink business case makes sense given the \u201cincredible amount of money\u201d spent on something that \u201cmay or may not work.\u201d He asked Musk if he also had doubts.<\/p>\n

\u201cThe business case is not subjective, it is objective,\u201d Musk replied<\/a>. \u201cIf you can provide a compelling internet connection, where the quality of the product and the price are competitive with terrestrial options\u2014or often there are simply no terrestrial options\u2014then you obviously have a business.\u201d<\/p>\n

Tesla hassles<\/h2>\n

SpaceX being private also spares it from analysts\u2019 influence, Musk added this week. One of the challenges of public markets, he said, is that \u201ca lot of the analysts following companies have a time horizon that is maybe only a year or two\u2026they do not care about what your long-term outcome will be because their career is dependent on how you do in the short term.\u201d\u00a0<\/p>\n

At Tesla, \u201cwe feel like we have a sort of moral obligation to not have a bad quarter and disappoint people,\u201d he said, adding that he\u2019s often spent New Year\u2019s Eve at delivery centers until midnight.<\/p>\n

He complained that the \u201clegal burden of being public is also way too high. So if you\u2019re public, you\u2019re just going to be sued nonstop by these class-action law firms\u2026the plaintiff is simply a puppet, but the media never mentions this\u2026That drives me crazy. It\u2019s constantly happening.\u201d <\/p>\n

Musk acknowledged the advantages of Tesla going public, the most obvious being the greater capital availability. It also helped the carmaker clean up its capital structure, which was \u201coverly complex as a private company,\u201d he added.<\/p>\n

But, he said, it\u2019s \u201cbeen a tremendous distraction as well on the downside.\u201d<\/p>\n

At SpaceX, by contrast, Musk and company have largely floated above such earthly distractions. \u00a0<\/p>\n<\/div>\n

Subscribe to the Eye on AI newsletter to stay abreast of how AI is shaping the future of business. Sign up<\/a> for free.<\/div>\n