Starlink is one of the most-hyped consumer products of the recent past. In December 2022, it reached its 1 millionth subscriber after being made available to the public less than 1.5 years before.
Therefore, consumers and investors alike are salivating at the chance of acquiring a stake in the company.
In the following article, I’ll cover everything that there is to know about Starlink’s stock and IPO. Let’s get it going!
Is Starlink Publicly Traded?
No, Starlink is not a publicly traded company. It is currently owned by its parent company SpaceX, which itself remains in private ownership as well.
Therefore, as a private company, neither the shares of Starlink nor SpaceX are available to retail investors.
SpaceX itself, according to Crunchbase, has raised close to $10 billion from institutional investors like Fidelity, Google, and even NASA.
The company is currently valued at a whopping $125 billion after it raised close to $2 billion during the summer of 2022.
However, there is some hope that Tesla and maybe even retail investors will be able to receive preferential access to Starlink’s stock upon IPO.
After being asked by a Twitter user about “first dibs for Tesla retail investors,” SpaceX founder and CEO Elon Musk said that he will do his “best to give long-term Tesla shareholders preference.”
Involving retail is certainly a viable strategy in driving interest for the company’s stock, which will consequently maximize price and thus the proceeds SpaceX and Starlink could fetch from a potential IPO.
Whenever Starlink goes public, it will likely be spun out of its parent company SpaceX and thus be publicly traded as a separate entity.
One of the biggest reasons is profitability. Starlink is eventually expected to operate at profit margins of around 50 percent, which makes for a much more compelling investment story.
SpaceX, on the other hand, will continue to operate in a cash-intensive environment to fulfill its mission to colonize Mars. Therefore, its profitability will be constrained for potentially decades to come, which isn’t necessarily what investors putting their money into a stock are looking for.
On the other hand, the valuation of a company like Starlink is much easier to plot given that it runs on a subscription basis with partial lock-in effects. Subscribers in rural areas often do not have many viable alternatives, which means they will likely stay loyal for years at a time.
After all, there is a large amount of historic data on a variety of different satellite communication operators, such as Iridium Communication, which act as comparables when pricing the stock.
By spinning off Starlink, SpaceX’s investors and shareholders can thus accrue substantially more value (i.e., higher share price) than if the two companies would go public together.
With that being said, let’s take a closer look at when Starlink is actually projected to go public.
When Will Starlink Go Public?
The latest estimates, both by Elon Musk and industry experts, see Starlink go public sometime in 2025 or 2026.
But how did they arrive at this prediction? The first indication of a potential Starlink IPO was first provided by SpaceX COO Gwynne Shotwell.
“Starlink is the right kind of business that we can go ahead and take public,” she told a group of investors back in February 2020.
Interestingly, internal calculations already had the company going public two years later. CNBC was able to get its hands on emails sent by Musk dating back to May 2019.
In the email, which was sent to various SpaceX employees, the SpaceX founder said that “it will probably make sense to take Starlink public in about three years or so.”
Therefore, Musk and SpaceX initially anticipated taking Starlink public sometime in 2022 – a feat that obviously did not materialize.
Why has the IPO been pushed back by another 3 to 4 years, though? The main man himself gave some pointers to the public as to why that’s the case.
First and foremost, operating a satellite communications company is an inherently complex operation that requires billions of dollars in upfront investments.
SpaceX previously estimated that it would cost around $10 billion to launch the 12,000 satellites it initially wanted to deploy. The company has since filed with the FCC to operate a network of 42,000 satellites.
Now, Starlink does possess one significant competitive advantage, which is that it can take advantage of the comparatively lower launch costs made possible by its parent company SpaceX.
This competitive advantage is particularly evident when looking at Starlink’s competitors. OneWeb, which plans to deploy around 630 satellites, had to contract SpaceX for launch services after it was forbidden to use Russia’s Soyuz rocket due to the war in Ukraine.
Those launch services are obviously costlier for OneWeb than what SpaceX would pay. Additionally, SpaceX often onboards its own satellites into contracted launches (a concept called rideshare), thus allowing the firm to ramp up its network substantially faster. In essence, Starlink’s competitors also fund portions of its business by contracting with SpaceX.
By the way, OneWeb also went through serious financial troubles itself, filing for bankruptcy back in March 2020. The bankruptcy and subsequent reorganization severely delayed additional launches, thus negatively affecting its bottom line.
Right now, SpaceX is likely absorbing the losses that Starlink incurs. Meanwhile, the parent company continues to raise funding from institutional investors who remain collectively excited about the prospects of space exploration and travel.
If Starlink were to go public now, even after reaching 1 million subscribers back in December 2022, its projected annual revenue run rate of $1.32 billion would still not be enough to wow investors – especially in a recessionary environment.
Predictable revenues and a clear path to profitability are thus essential parts of the story it would need to tell public investors during the IPO roadshow and beyond.
Back in 2017, SpaceX projected that Starlink would generate around $12 billion in revenue by 2022. Given that Musk initially predicted to take Starlink public that year, this likely would’ve been the revenue estimate at which Starlink operates at healthy enough profit margins.
Therefore, Starlink would roughly need to 10x its current subscriber base of 1 million, which it predicts to reach by 2025 or 2026.
It certainly needs to amp up its deployment of new satellites as well as new market launches given that others, including OneWeb or Amazon’s Project Kuiper, are working on getting their respective constellation into customer hands.
Rising competition, given the limited size of the satellite internet market, is certainly one of the major reasons why Starlink and thus SpaceX may ultimately end up failing.
Musk himself essentially confirmed that estimate in June 2022, too. “I’m not sure exactly when that [IPO] is, but maybe it will be like — I don’t know, just guessing — three or four years from now,” Musk said at an all-hands meeting.
Once the firm is “in a smooth sailing situation” with “good predictability,” it would make sense for it to go public.
Interestingly, others think that a Starlink IPO might take place much sooner. Investor Chamath Palihapitiya, during a January 2023 episode of the All In podcast, laid out a few arguments as to why Starlink might already go public.
“He’s going to create breathing room for himself. This is the simplest and most obvious way for him to do it. It’ll give him a ton of more dry powder,” he said in the episode in reference to the margin loans Musk took on to finance the Twitter deal.
How to Invest in Starlink Before It Goes Public?
Unfortunately, regular folks like you and I do not have the ability to invest in Starlink or SpaceX before it goes public.
That privilege is normally reserved to institutional investors. SpaceX counts powerhouses like Andreessen Horowitz, Sequoia Capital, or Founders Fund as backers.
By law, investing in private companies is restricted to accredited and institutional investors. However, there are other practical reasons why a high-growth tech company like SpaceX would restrict access to institutional investors.
First, it would overcomplicate and further dilute the cap table. This would be a nightmare from an administrative perspective, especially if existing private investors wanted to load off some of their shares.
Second, investors normally get access to confidential company data such as revenue, profit/loss statements, the number of customers, and so forth.
SpaceX, which likely continues to incur losses, needs to maintain a positive public image, especially considering the potential danger it poses to astronauts or astronomers.
Negative press is particularly detrimental to a company seeking to go public as it could affect the amount of money it is able to raise during the IPO.
Starlink Stock Price Prediction: What Could It Be Worth?
As previously stated, both SpaceX and Starlink remain in private ownership. Since the stock is not publicly tradable, it is up to the people at SpaceX and its institutional investors to come up with a market-clearing price.
This notion obviously changes when Starlink goes public and its stock becomes available to the masses. So, how much would retail investors need to spend to acquire a stock of Starlink after it goes public?
For once, we do know how much institutional investors are paying to acquire a stake in SpaceX and Starlink.
In November 2022, Reuters reported that investors during the summer 2022 rounds paid $70 per share. That price point is set to increase to $85 as SpaceX is looking to raise money at a valuation of $150 billion.
Interestingly, this wasn’t even close to the price that previous investors were willing to pay for a share. Back in February 2022, SpaceX underwent a 10-for-1 stock split, thus reducing the price per share from $560 to $56 apiece.
While a stock split is only cosmetic in nature, it is often utilized by public companies to make the share price more accessible to the average retail investor.
This is also the range where a lot of Starlink’s competitors have historically traded at. ViaSat, for instance, reached an all-time high of $92 per share back in May 2019 and currently trades around the $30 to $40 range.
The above-mentioned Iridium Communications has been trading around the $40 to $50 range throughout 2021 and 2022.
Apart from the number of shares issued and industry comparables, there are a variety of other factors that determine the stock price of a company at the time of going public and beyond.
For once, investment banks taking companies public consider the firm’s previous valuation during the last funding round, performance measures such as revenue or profit, macroeconomic factors (e.g., interest rates), and future growth prospects.
One aspect that is unique to Starlink is the loyal following of its CEO Elon Musk. It wouldn’t be surprising if retail investors significantly drive up Starlink’s stock price when it goes public, thus leading to a popping of the stock price.
Luckily, those IPO pops normally only last a few days or weeks and subsequently reverse to the mean.
In summary, retail investors that want to purchase Starlink stock during and after the IPO can probably expect to pay somewhere between $50 to $100.