SpaceX likely to spin off Starlink satellite business and pursue an IPO

SpaceX likely to spin off Starlink satellite business and pursue an IPO

SpaceX, the rocket company founded by Elon Musk may spin off its Starlink satellite business and pursue an IPO, SpaceX COO Gwynne Shotwell told investors at a private investor conference hosted by JPMorgan Chase. While SpaceX itself will stay private for the foreseeable future, Shotwell said that Starlink, SpaceX's burgeoning satellite business, might be "the right kind of business that [SpaceX] can go ahead and take public". 

The company has recently launched the fourth batch of Starlink satellites, making it the third launch of V1.0 satellites after the first experimental V0.9 batch in May 2019. With ~240 operational satellites in orbit, SpaceX is now the largest satellite operator by active satellites, surpassing Planet Labs. Shotwell announced in 2019 that there would be around 24 Starlink launches in 2020, if everything goes according to plan. 

SpaceX is leveraging its experience in building rockets and spacecraft to deploy the world's most advanced broadband internet system, targeting service in the Northern United States + Canada in 2020 and near global coverage of the populated world by 2021. 

With performance that far surpasses that of traditional satellite internet, and a global network unbounded by ground infrastructure limitations, Starlink will deliver high speed broadband internet to locations where access has been unreliable, expensive, or completely unavailable.

In 2019, SpaceX CEO Elon Musk said that if Starlink could get a few percent of the global telecommunications market, it could net revenue of $30B to $50B a year – or about 10 times the highest annual revenue SpaceX expects from its core rocket business. 

By making reusability their primary objective, SpaceX is has completely cornered the market in cheap launch. As a heavily vertically integrated company being its own customer, SpaceX is also able to launch Starlink satellites for about 1/10th of the price per kg of the original Iridium constellation. 

With Starship, that price advantage is only going to get bigger. While Falcon 9 can squeeze about 60 of the flat satellites into its fairing, Starship will be able to deliver 400 Starlink satellites into Low Earth Orbit – per launch.

In addition, austenitic stainless steel, in particular Type 301, is much cheaper than carbon fiber, which SpaceX was originally going to use, – by a huge margin: Carbon fiber costs $135 per kilogram, and 35 percent of the stuff must be scrapped, making the true cost of the material nearly $200 per kg, compared to just $3 for stainless steel. 301's – or 30X, which is the customized alloy SpaceX will use later – high melting point and increased strength at cryogenic temperatures are further advantages.

Even without Starlink and Starship, SpaceX is already one of the most valuable private companies, and, during its most recent funding round, was valued at roughly $33.3B. Shotwell has said in the past the high demand for SpaceX shares allows the company to be "very picky about who invests". 

While SpaceX was able to demonstrate internet speeds of 610 megabits per second to a C-12 military transport plane in flight, Starlink is still in a very early stage, making it unlikely for the IPO to happen anytime soon.

Also, by retaining a major stake and controlling vote in Starlink, SpaceX will likely still be able to use the income generated by Starlink to fund its ambitious Mars plans. The company may even retain the satellite manufacturing business as a whole, and establish Starlink as a purely service-oriented business with subscription customers and recurring revenue.

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Vivien Hantusch

Vivien Hantusch

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