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This is Isabelli and Alexis Christopherus with Bloomberg Business Week Daily filling in for Carol Masser and Tim Stenovic. A lot of news broke in the last few minutes. Alexis, it's been a busy after the bell for sure.
Yes. So, we'll have a nice breather post 5:00 p.m. But for now, it's all about SpaceX. And joining us live is Anthony Hughes. He's capital markets reporter at Bloomberg News. He rushed over here to help us break.
I saw him running to the studio. So, thank you so much, Anthony. We got some more details. But there are things that we already know. I mean, SpaceX targets a 1.77 trillion market value in the NASDAQ IPO. They seek to raise $75 billion again in the biggest IPO ever. Anything that you're looking out for or that surprised you?
Yeah, I think this filing really just confirms a lot of the reporting that's happened over recent days. And I think the really interesting thing that's happened in recent days is that the company has decided to go with a fixed offering price of $135 per share. And I think if you look at the previous iterations of the filing, I think they were considering a range but it appears that they're now looking at a fixed price. And I think people will speculate or wonder why they're doing that because for most IPOs in the US or certainly large IPOs, you generally go with a range and then gauge the amount of demand out there for the offering and then ideally price the offering at the high end of that range and potentially go above. But there's a lot of speculation today about why this is the case.
Why would I mean let's just speculate for a moment shall we? Why would a company why would this be advantageous to SpaceX to do this to say look this is the price?
Well I think one I think some of the comments today have been around the fact that there has been a lot of the word people use is price discovery in private markets. So, you can see that there's a quoted price on secondary private markets for this stock and this is not too far away from that. So, it's possible that people have to take a view really on whether they think this is a very high price or a great bargain. And obviously, there's going to be a range of views.
A bargain at a 1.77 trillion valuation.
Well, I just think that there's going to be there is a view that a certain portion of the investment community will back Elon and won't be too sensitive to valuation. I'm not saying it's a bargain, but I think it's more that people will generally back Elon Musk and they probably won't necessarily do a lot of analysis as to whether the valuation stacks up or not. I think a lot of people think that yeah it is a very high very large valuation and one that is not supported by the historical numbers.
But it's a bet on Elon Musk at the end of the day isn't it?
Yeah. Well, I think even though the filing doesn't provide forward-looking numbers and financial forecasts, I think there is a lot of hints that they will be making significantly more revenue in the next few years. You know, just through for instance that deal that they've done with Anthropic where they'll be collecting I think it's a billion dollars a month for the compute that they're providing them. You know, that's one example of where you can see that there will be a quite material increase in the revenue of the company over the next year or so. And when people go and the people who do the valuation work on this will be looking at the company's likely been looking and we're going to find out about more about this in the next few days but we'll be looking to value this probably off like 27, 28, 29 maybe longer revenue. So they'll be looking out in the future.
Are we even talking about hey SpaceX is going to be profitable at X or do we care?
Well, I think the issue at the moment with a lot of the companies in the AI space and obviously SpaceX is partly going to be or very in some people would say largely an AI story is that I think there appears to be an expectation that there's going to be a lot of uncertainty and it could be quite volatile and even though for instance I think Anthropic they're talking about them going into profit in the current quarter but I think even with that people are talking a lot about there being a lot of ups and downs along the way. So yeah, I mean I think this will be valued off revenue and so therefore revenue growth will be the thing that people will be initially looking at, but obviously further out in the future people will obviously love to see the company make some actual profit.
Excellent point though on revenue. Yeah. So I mean Musk has never been known to follow Wall Street conventions. I mean you gave a classic example, the 135 per share piece that's a fixed price. Is there anything else that surprised you? Like how much of this speaks to his own playbook that's very unique to him?
Yeah. I think we'll see through the road show that there'll be aspects of the road show that are quite unique. I mean I think we're already hearing about some events that are happening in the next few days tomorrow that will bring in a wider pool of investors for instance and I think that Elon Musk has already said in the past that he wants to look after the smaller investors as well. That'll be a bit more of a theme with this IPO than we've seen in other big IPOs and we're still to find out a lot of the details about that. Elon Musk is not selling any shares in this IPO. He's going to control the business and he's agreed to a one-year lockup. So, I think a lot of people are, people who are I mean, Elon Musk has his fans and his critics, and I think the critics might say that he's going to enrich himself, but I think the alternative to that is that the argument against that, I guess, is that he's not actually selling in this IPO, but obviously the value of his stake could increase materially if the IPO is a great success.
Let's talk about how SpaceX plans to use all these funds that they will be raising in this historic IPO. I would imagine much of it's going to go toward expanding AI, but what else what more do we know?
Yeah. Well, ironically, with some of these big IPOs, the use of proceeds becomes a bit of an afterthought because, obviously they do have very high capex needs because of the nature of their businesses space and AI. So, I think the prospectus talks about that in fairly broad terms. So I think there are some specifics around the AI buildout that they're doing and also obviously there's a lot of capex associated with space but really I think in most of these big IPOs now these companies want to raise primary issuance but keep the IPO relatively small as a percentage of the overall market cap. So there will ultimately be a supply demand imbalance where even though 555 million shares sounds like a lot of shares in any sort of normal reading the float of the company's going to be looks like it's going to be sub 5% which will mean that the supply demand dynamics at the IPO at least could assist in the company getting a quite healthy trading initially at least. I mean, the question is always longer term could be, some of those early gains can evaporate.
Anthony Hughes, Bloomberg Markets reporter, jumping into our studio here, to discuss this breaking news on SpaceX and its pending IPO. I want to bring back Ed Ludlow now, co-host of Bloomberg Technology. Ed, we were talking here with Anthony just a moment ago about the unique well, there are a lot of things that are unique about this filing, but the fact that SpaceX came up with it, not a range, but said it's going to go with the pricing of $135. We were talking about why they might do that. Any insights there, Ed?
Not sure Ed could hear us. Looks like he's not from what I can tell seeing him right now. Maybe we Oh, Anthony's going away.
You're right. I mean, there's so many unconventional things here. Alexis, do we have Ed back?
Okay. I mean, okay. So, for example, June 11 is expected to be the IPO. The IPO was expected to price as soon as June 11. But I guess now we've gotten that, so we've gotten that early. But I really wonder how this will play out. I mean, it feels also kind of surreal and kind of cool, I guess, to see someone just break all the rules that the traditional playbook has.
Yeah. Move fast and break things. Wasn't that the motto, right, in Silicon Valley? So, you know, Elon Musk continues to do that. So this road show, I mean, what can we expect from this road show?
Well, the road show is relatively quick. Road shows have compressed for a lot of IPOs in recent years. So, but we're still talking about a 6 day road show here, one that goes across one weekend. And you know, a lot of IPOs are getting done in that sort of time frame. But for an IPO of this size, I mean, that's a pretty quick time period. I mean I think as I said there's a lot of talk about different events that are happening over the next day or two where for instance high net worth retail investors from the big banks are going to get a presentation I think of as part of the road show.
All right we are looking forward to the road show. We do have Ed Ludlow now co-host of Bloomberg Technology. And Ed we know SpaceX now plans to market about 555 million shares for $135. We were talking with Anthony Hughes here of Bloomberg about why they chose to do that instead of, you know, giving a range the way most companies do, then understanding what the high end of the range would be and saying that's the price. Why do you think they're doing this?
Yeah, I would just reflect on what we talked about earlier, which is there was a time or a period where the valuation of this company was 2.2 trillion or 2 trillion. We reported last week 1.8 trillion. Right now on the marketed fixed $135 a share in the offering it's 1.77 trillion and the sense I'm getting from all the parties there's the cornerstone investors the existing cap table the bankers what the finance or at SpaceX thinks it looks like they just all talk to each other saying let's start at a reasonable place and see how the market responds to it because like Anthony knows this better than anyone he's better to answer this the IPO prices on Thursday June 11th so the number can go up and that's the main point.
And again I want to bring in the unprecedentedness of JP Morgan CEO for example Jamie Dimon planning to discuss the upcoming SpaceX IPO with thousands of the bank's high net worth clients this week. Talk to us about the significance of that and do you expect more banks to follow suit?
Well look, we keep saying this is unprecedented, the biggest IPO in history from the dollar raise perspective, the valuation at the time of going public is very interesting. But the other way of saying that is there's a lot that investors have to understand because a listing is a moment in time where the stock will trade that Friday. This is now old news but the content of the S1 is SpaceX asking present and future investors to make a bet where it clearly discloses the risks of what it's trying to do on a wild story and literally I don't apologize for this one bit an out of this world story where the total addressable market is $28.5 trillion. It's really normal to include a TAM number in the dock. But it's not normal to say we're right now a rocket company that puts satellites that are pretty good cash generators into orbit in Starlink. But in the future, we're completely different. We're selling trillions and trillions of dollars worth of AI software to companies and reaping benefits from it ourselves. And so, JP Morgan doing this with those high net worth individuals, family offices, and those that may or may not wish to participate in the IPO, it's logical, right?
I mean, this certainly makes Aramco's 29.4 billion listing back in 2019 kind of puny, doesn't it? I mean, in comparison, and just to give you guys a feel for how big this thing is, there's one, two, three, four, there are five banks leading this deal, and they're all the usual suspects.
Yeah. And then there's 15 others, aren't there? So, just tell us, you know, is Elon Musk going to be out there sort of like on foot going around to different places in person during the 6 day road show?
It's a really good question. The honest answer is I have no idea. I don't know. It's not in the reporting. What I would say is that all of those that I've spoken to close to this over a six-month period is that Brett Johnson, the CFO, and Gwynne Shotwell, who's the president of SpaceX, are very active, very highly regarded by the investor base. And there are lots of important people at SpaceX. It's not just Elon Musk, right? Elon Musk is in the risk factors, right? They say clear as day, the future success of this company depends on Musk being a part of it, but I don't know the answer. I'd imagine that execs will be out in force.
Ed, I mean SpaceX aside, we have Anthropic and OpenAI. Talk to us about how I mean it looks like this IPO is successful at least just from what we're seeing now. I mean how much of that will pave the way for Anthropic and OpenAI?
Yeah, I mean to catch the audience up, there was lots of reporting at the end of last week about how the SpaceX IPO was progressing and where we were at in valuation. Kyle and I broke that story that the actually the valuation for SpaceX was $1.8 trillion, which Musk said was false on X ended up being 1.77 trillion. So we were off by just a touch. And then Anthropic filed confidentially for IPO. Anthropic being, one of the two prominent frontier labs for AI alongside OpenAI. And the reason I give you that preamble is that all of the investors that I spoke to who are in both companies, they all say that look, they probably spent time reading the SpaceX S1 over the last two weeks and decided to pull the trigger based on what they read.
What is the one thing you're going to be listening for in this road show regarding SpaceX, Ed?
Yeah, I mean there is lots of financial mechanics on this the future of the Cursor deal. So SpaceX has an agreement in principle to buy Cursor the right to buy Cursor for $60 billion. That's a coding platform. So that to me is kind of interesting. But if you guys go back to the beginning of the year, and I'm not doing this as an exercise in vanity, I think it's just really important. We reported that SpaceX was planning to IPO, but we very specifically said the rationale for raising so much money was to buy GPUs to put into space. That's what this is all about. And so I'd love to hear more about that and how investors feel about it.
We are in the coming days. Ed Ludlow, a Bloomberg Tech co-host, Anthony Hughes, with Bloomberg, a markets reporter. Thank you guys so much for joining us on this breaking SpaceX story.
Stay with us. More from Bloomberg Business Week Daily coming up after this. You're listening to the Bloomberg Business Week daily podcast. Catch us live weekday afternoons from 2:00 to 5:00 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App or watch us live on YouTube.
Let's bring in our next guest, Caroline Goolan, the new chief growth and policy officer and head of government and regulatory affairs at NRG. She joins us now live from Zoom. So Caroline, thank you for joining us. Maybe we can start with this. Everyone blames data centers for higher power bills, but what's the biggest thing people are getting wrong in your view?
Well, thank you for having me today. I'm really excited to have the conversation and it's such a critical one not only for our country but our communities. I think this is a complex challenge facing our entire industry. And when we sit back and we ask ourselves where are we and where are we going, we have to reconcile the fact that we are living in an age that there is a disconnect. There is a disconnect between the pace and growth of technological advancement and the demand for economy to grow and the physical reality of the grid and how we build our infrastructure. And historically, the way we built out infrastructure in this country was really a just in time approach and we did it incrementally and we grew very small increments year-over-year and now we have this huge economic opportunity in front of us and it's asking us to grow rapidly and in that tension we are finding a lot of opportunity but we're finding a lot of challenge and I think when you ask the question how are data centers stressing the grid or what's the challenge in front of us. We really have to go back and say was our infrastructure prepared for this? Was it not? And the reality is we weren't prepared for the opportunity in front of us. But I think the industry today is really working to develop the innovations to make sure that we are going to grow well in the future and unlock all the opportunity the AI economic development brings to us.
And Caroline, we want to talk more AI in a moment with you, but I've got to talk about hurricane season, which is now actually underway. I think it started June 1st. And this time of the year, there's always that concern around electricity grid reliability. And I think maybe this year that concern is heightened because of all of the data centers that are, you know, sort of stealing the power away from that grid. How well prepared are we do you think for this hurricane season?
I think NRG is preparing and I think we are investing in the innovations that are going to protect our communities and ensure that we meet all customer demand. You know, I go back to this tension that we're seeing and you're absolutely right. We have sort of three legs of the stool. We need to meet customer demand and load growth. We also need to keep the lights on and make sure the grid operates reliably. And at the same time, we need to do all of this by keeping costs affordable to all of our customers. And at NRG, we're really leaning into innovations that I think before were sort of seen as pilot programs. So take the opportunity of flexible power. You know, for most of my tenure in my career, flexible power was seen as something that was on the margins. It wasn't a real capacity solution. But what we're seeing across our fleet is that flexible power can service not only the needs of today but the needs of tomorrow. So for example, we saw with Storm Beryl that we were able through flexible power to produce 1.7 gigawatt hours to make sure that we kept the lights on. And that was across 126,000 customers that we were able to work with to make sure that we met the grid reliably, kept cost down, and kept those lights on with the threat of extreme weather events.
So, if AI demand keeps exploding, I'm just really curious about this, then where does the grid hit its biggest stress point first?
