The numbers are staggering, even by the standards of a market that has come to expect the extraordinary from Elon Musk. SpaceX, the private rocket company that has reshaped the space industry, is reportedly valued at $1.75 trillion ahead of what promises to be the biggest stock market debut in history. For context, that is more than the entire UK gilt market in terms of daily turnover. And now, whispers from the City suggest that UK pension funds are considering a stake. This is a story about risk, return, and the gravitational pull of the next big thing.
Let us start with the valuation. $1.75 trillion. That is not a misprint. It places SpaceX comfortably above the likes of Tesla, Meta, and Berkshire Hathaway. It is a multiple of an estimated $8 billion in revenue. The implied price-to-sales ratio is roughly 200. To put that in perspective, a typical FTSE 100 company trades at a price-to-sales ratio of around 1.5. Even the most high-growth tech stocks rarely top 20. This is not investing; it is speculation on a grand scale. But then, SpaceX is not a typical company. It has a near-monopoly on satellite launches, a Starlink constellation that promises global internet dominance, and the ultimate moonshot: Mars colonization. The market is pricing in not just success, but world-changing success.
Now, consider the UK pension funds. These are the custodians of our retirement savings, mandated by law to act in the best interests of their members. Traditionally, they have been the bedrock of the gilt market, buying government bonds that offer a guaranteed, if meager, return. But with inflation still stubbornly above target and gilt yields volatile, the search for yield has become desperate. Enter SpaceX. The allure is obvious: a chance to capture some of that exponential growth. But the risks are equally clear. SpaceX is a private company with limited disclosure, a founder with a history of erratic behavior, and a business model that depends on continued technological breakthroughs and favorable regulation. A single failed launch or a regulatory setback could send the valuation into a tailspin.
Let us be clear: UK pension funds are not known for their appetite for venture capital. Their portfolios are dominated by bonds and blue-chip equities. But the pressure is mounting. The government has been urging them to invest more in 'productive assets' to boost economic growth. And with interest rates now plateauing, the returns on gilts look increasingly unattractive. The temptation to dip a toe into SpaceX is understandable. But it represents a fundamental shift in risk appetite. If pension funds start piling into unicorns, what does that say about the state of the broader market? It suggests that the 'risk-free rate' is no longer safe enough, and that investors are being forced into higher risk assets to meet their return targets. This is a symptom of a dysfunctional market, not a healthy one.
Let us also consider the mechanics. SpaceX is likely to list on a US exchange, meaning UK pension funds will have to deal with currency risk, different reporting standards, and potential capital gains tax complications. The deal will be underwritten by the usual suspects: Goldman Sachs, Morgan Stanley, maybe an appearance from a UK bank to give it a veneer of respectability. But the fees will be eye-watering. And the liquidity? The free float will be limited, with Musk retaining a controlling stake. This is not a stock you can easily sell when the market turns. It is a bet that the future will look like the present, only more so.
My advice to the trustees of UK pension funds is this: proceed with extreme caution. A small, speculative allocation might be defensible as part of a diversified portfolio. But there is a saying in the City: 'If you don't understand the asset, you don't own it.' SpaceX is a magnificent engineering company, but it is also a black box. The valuation is based on faith, not fundamentals. And when faith falters, capital flight is swift. Remember the dot-com bubble? Remember the 2008 crash? The same old mistakes, just dressed up in new technology. For the sake of our pensions, let us hope the trustees remember that too.
