SpaceX is preparing for a debut bond offering aiming to raise between $20 billion and $25 billion, with investor orders totaling approximately $30 billion even before the official sales process began. This potential deal would be one of the largest debt offerings of the year. The company's investment-grade ratings from Moody's (Baa1) and S&P Global Ratings (BBB) are attributed to its dominant position as a launch provider for the US space program, its Starlink satellite network generating billions in recurring revenue, and ample liquidity to fund its AI expansion.
Despite these strong points, SpaceX presents an unusual profile for a high-grade borrower. The company is characterized by heavy spending, burning through cash, and relying on future growth to justify its financial projections. S&P expects SpaceX to remain cash-flow negative until 2030, with spending intensifying in 2027 and 2028. To cover this gap, borrowings are projected to climb significantly, reaching an estimated $132 billion by 2028, a substantial increase from near zero presently after accounting for cash and lease liabilities.
The bond offering includes five tranches with maturities from five to 30 years, with the longest-dated bonds yielding about two percentage points more than US Treasuries. The proceeds are intended to refinance a $20 billion bridge loan and cover other corporate expenses. Meanwhile, SpaceX's stock has faced a notable decline since its IPO, erasing over $600 billion in market value (a $1 trillion loss from its peak of $3 trillion the previous week), which has increased scrutiny on the equity cushion underpinning bondholders.
Credit investors, however, are largely undeterred. They are attracted by SpaceX's strategic importance, its nearly $2 trillion market capitalization, and the lack of formidable competitors in its launch business. Many believe that much of its near-term spending is directed towards projects expected to yield returns relatively quickly. Analysts like John Lloyd of Janus Henderson Investors note that investors are not buying into SpaceX because it resembles a traditional high-grade borrower, suggesting a unique investment thesis driven by its market position and future potential.
The move into the bond market, following a $75 billion IPO, has raised questions among stock investors about why a company with over $100 billion in cash needs additional debt. This new debt adds fixed-interest obligations to a company currently posting losses, which has made equity investors nervous and contributed to the stock's recent downturn. Despite retail sentiment weakening, institutional investors, such as ARK Invest, have treated the sell-off as a buying opportunity, indicating a divided market reaction.
