The news broke on the wires at 14:30 this afternoon: SpaceX, Elon Musk’s rocket venture, is finally coming to the public markets. Cue the predictable headlines hailing it as a victory for British-born innovation. Let’s be clear: Musk is a South African by birth, but he studied in Canada and built his empire in America. The British connection is, at best, tenuous. Still, the narrative writes itself: the plucky genius from Pretoria who learned physics at Queen’s University, Kingston (Ontario, not Surrey), then moved to Silicon Valley. The City is already giddy.
But what does this IPO really mean for investors? First, let’s talk valuation. Rumours peg SpaceX at $180 billion, a figure that makes Tesla’s own valuation look almost reasonable. The company has been valued at $137 billion in private trades as recently as May. For a firm that burned through $1.5 billion in free cash flow last year, that’s a punchy multiple. Yes, it has a near-monopoly on heavy-lift launch services in the West. Yes, Starlink is generating real revenue from broadband subscriptions. But $180 billion? The market is pricing in perfect execution.
Now, the index implications. If SpaceX lists on the NYSE or Nasdaq, it will not automatically join the FTSE 100. But the spin here is that it ‘highlights the strength of British tech education’. The Prime Minister’s office has already released a statement praising the ‘entrepreneurial spirit’. This is the kind of rhetoric that makes a financial editor reach for the smelling salts. The reality is that the UK has failed to retain the rewards from its own education system. We export talent, then import the shares at a premium. It’s a value-destroying game.
Let’s examine the capital flight angle. British pension funds have been increasing their allocations to US equities for years, chasing the Magnificent Seven. SpaceX will add fuel to that fire. The FTSE All-Share is already underweight in technology. This IPO will accelerate the outflow of domestic savings into dollar-denominated assets. Sterling yields may suffer as a result. Gilts are already under pressure from sticky inflation and a widening fiscal deficit. If UK institutions pile into this IPO, expect further weakness in the pound.
Central bank watchers, take note. The Bank of England is walking a tightrope. Inflation is proving more persistent than hoped, with services CPI at 5.3%. A hot IPO market in the US, particularly for a high-growth name like SpaceX, could keep global risk appetite elevated. That might force the Fed to maintain higher rates for longer. The Bank’s Monetary Policy Committee will be watching the dollar-sterling carry trade. A stronger dollar would import inflation via energy costs. It’s a headache they did not need.
On market volatility, brace for swings. SpaceX’s retail following is immense. The Reddit crowd will treat this like a meme stock. But the fundamentals are complex. The company has a $14 billion backlog of launch contracts, but competition from Blue Origin and China’s CASC is growing. The valuation relies heavily on Starlink reaching 40 million subscribers by 2027. That is an ambitious target, especially with governments raising concerns about orbital debris and spectrum allocation.
Finally, fiscal responsibility. The UK government is reportedly considering a ‘National Investment Fund’ to co-invest in such IPOs. This is a terrible idea. Taxpayers should not be funding the dreams of billionaire entrepreneurs. If the private market wants to bid up SpaceX shares, fine. But the state should not be in the business of picking winners. We have seen this play before with British Energy, with Northern Rock, with the Green Investment Bank. It does not end well.
So, breathe. The SpaceX IPO will be a landmark. It will mint millionaires, fill the business pages, and generate a lot of hot air. But for the British economy, it is a reminder of what we have lost. We produce the talent, but we fail to capitalise. The real triumph would be a homegrown rocket company that lists on the London Stock Exchange. Until then, the City will remain a spectator, buying tickets to someone else’s success.
