SpaceX is launching its inaugural investment-grade bond offering, a move anticipated to be the initial phase of a substantial borrowing strategy to finance the company's artificial intelligence ambitions. This follows its record-breaking $75 billion Initial Public Offering. Investment banks, including Goldman Sachs Group Inc. and others, are organizing investor calls, with a bond sale expected to follow, featuring maturities ranging from five to 30 years.
SpaceX is looking to raise between $20 billion and $25 billion from this initial bond offering. The deal has already attracted approximately $30 billion in investor orders even before the formal sales process began, which would place it among the largest bond sales of the year. The proceeds from this bond sale are intended to refinance an existing $20 billion bridge loan and cover other corporate expenses.
The company has received investment-grade ratings from all three major bond rating agencies. Moody's and Fitch Ratings assigned grades of Baa1 and BBB+ respectively, which are three notches above junk status, while S&P Global Ratings assigned a BBB rating, one notch lower. Despite these ratings, S&P projects SpaceX to remain cash-flow negative until 2030, with a sharp increase in burn rate expected in 2027 and 2028. To bridge this financial gap, SpaceX is anticipated to significantly increase its debt, potentially reaching $132 billion by 2028, a substantial jump from its current near-zero net debt.
Several large financial institutions, including Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley, are managing the bond sale. The longest-dated bonds are being offered at about two percentage points above United States Treasuries. Despite some skepticism about the company's cash burn and spending, many credit investors are drawn to SpaceX's dominant position as a launch provider and its Starlink business, which is generating significant revenue. The company's market capitalization still stands at around $2 trillion, and its near-term capital expenditure is strategically focused on projects expected to yield quick returns.
While the bond offering aims to secure significant capital, SpaceX's stock has experienced fluctuations since its IPO. After an initial surge, shares fell by 16% on the day of the bond announcement, bringing its total gain since the IPO down to 15% from its offering price of $135. Investors are questioning the need for additional financing given the $100 billion in cash on hand from the IPO. However, the company aims to get better terms through this bond offering for refinancing and to secure capital for future projects, particularly in AI, which requires substantial upfront investment.
