Moody's Ratings recently assigned Elon Musk's SpaceX a Baa1 investment-grade rating, raising skepticism among some financial observers. This rating, which is the eighth-highest investment-grade on Moody's 10-tier scale and only two notches above junk, comes despite SpaceX's limited public financial history, "sustained negative free cash flow," and significant capital spending expected in the coming years. In contrast, when Nvidia Corp. received the same Baa1 rating nearly a decade ago, it had a light debt load and over $1 billion in free cash flow after 16 years as a public company.
The seemingly generous rating reflects the credit markets' substantial trust in Elon Musk's ambitious ventures, including reusable rockets, a global satellite network, artificial intelligence, and in-space data centers. Bond investors are reportedly poised to provide SpaceX with approximately $20 billion in financing, with pricing on the 10-year portion of the debt potentially set at 130 to 135 basis points over the benchmark. Moody's justified the rating by highlighting SpaceX's dominant position as a launch provider for the U.S. space program and its Starlink satellite network, which generates billions in recurring revenue, along with access to sufficient liquidity for its AI expansion.
However, rating agency S&P, which grades SpaceX one notch lower at BBB, projects the company will remain cash-flow negative until 2030, with a rapidly increasing burn rate in 2027 and 2028. S&P anticipates SpaceX's borrowings could climb to $132 billion by 2028, a significant increase from its current near-zero net debt. The stock market has also added scrutiny, with SpaceX shares recently falling 16%, wiping out approximately $400 billion in market value, which impacts the equity cushion supporting bondholders. Ross Pamphilon of Impax Asset Management, while considering the bonds, described the company as "a powerful satellite business in Starlink attached to a cash-burning AI operation in xAI," suggesting it requires a "leap of faith." Conversely, John Lloyd of Janus Henderson Investors expressed optimism, believing that a significant portion of near-term capital expenditure will yield quick returns, potentially improving the credit rating if Musk achieves 75% of his goals.
