Twenty years in the City, and I have seen more than a few IPOs dressed up as national triumphs. Today’s offering from SpaceX, the rocket firm co-founded by Elon Musk, is no exception. The British government, never one to miss a photo opportunity, has been quick to claim that the company’s successful market debut is a vindication of the UK’s engineering heritage. But let us strip away the hype and look at the bottom line.
First, the numbers. SpaceX is reportedly valued at over $100 billion, making it one of the most valuable private companies in the world. The float, when it eventually happens, will be a liquidity event of staggering proportions. But the question for investors is whether the company’s valuation can be justified by its earnings. So far, SpaceX has been a master of the capital-intensive space race, burning through cash to launch Starlink satellites and develop the Starship rocket. The long-term profitability of these ventures remains uncertain. Governments are fickle customers, and the satellite broadband market is already crowded with competitors like OneWeb and Amazon’s Project Kuiper.
Yet the City is buzzing. Gilt yields have been stable, and the Bank of England’s recent rate hold has provided a tailwind for risk assets. But one must ask: is this a case of irrational exuberance? The tech-heavy Nasdaq has rallied hard this year, but inflation remains stickier than the central banks would like. If the Fed or the BoE are forced to hike again, the high multiple stocks will be the first to feel the pain.
The UK government, meanwhile, is patting itself on the back. The Business Secretary has been quoted saying that SpaceX’s success “proves that British innovation can conquer the world.” This is a stretch. Musk may have been born in Pretoria, but his co-founders and key engineers include a number of British nationals. However, the company’s headquarters and primary operations remain in Hawthorne, California. The UK’s real space sector, centred around the Cornwall spaceport and the satellite builder Surrey Satellite Technology, is a fraction of the size. Celebrating SpaceX as a national victory is like claiming the T20 World Cup win because your coach is Australian.
If anything, the SpaceX listing highlights the capital flight that plagues British tech. Our most promising startups, from ARM to DeepMind, have been snapped up by American or Asian buyers. The London Stock Exchange has struggled to attract high-growth tech listings, with firms preferring the deeper pools of capital in New York. Even the government’s own reviews, like the Kalifa Review, have pointed out the structural issues: pension funds that are too risk-averse, a lack of scale-up capital, and a tax system that penalises entrepreneurs. Until those are fixed, celebrating other people’s rockets feels like whistling in the wind.
For the average British investor, the SpaceX IPO is a reminder of the opportunity cost of being locked out of the biggest tech stories. The company has raised billions from a handful of elite venture capital funds, with retail investors left to buy the scraps in secondary markets. The government could have done more to cap the carried interest loophole and incentivise domestic venture capital, but that would have upset the hedge fund crowd that the Treasury so loves.
As a final thought, I would remind readers that the market debut of a single company, however dazzling, does not a national renaissance make. The true measure of fiscal health is not the valuation of a private rocket company, but the yield on index-linked gilts. Those remain stubbornly low, suggesting the market sees a decade of anaemic growth ahead. The government would do better to focus on balancing the books and improving productivity than claiming kudos for a company it had little hand in building.
Until the UK can produce its own space champions, not just front-row seats at the launch, the bottom line remains that we are spectators in the race to the stars.
