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SpaceX IPO, what could possibly go wrong?

SpaceX is getting ready to go public with an earth-shattering IPO.

Once investment institutions and the public are given a chance to buy shares in the company, Elon Musk's own personal net value will soar to levels that some claim are simply obscene.

The worrying thing about an IPO this big is that some institutional investors will be forced to buy in, whether they want to or not. That's because the total value of shares will instantly classify it as a key index stock that must be part of any indexed portfolio.

I see a huge potential for disaster here -- especially for pension funds that could see their value hugely impacted if things go wrong.

Of course it will only be a disaster if SpaceX falters or fails, so what are the chances of that?

On the face of it, SpaceX might sound like a pretty good bet. It has fingers in a number of pies.

It is in the rocket industry, providing launch services to several US taxpayer-funded government departments including NASA and branches of the military. These revenue sources amount to billions of dollars.

Recently it also purchased xAI, Musk's artificial intelligence service that provides the Grok LLM chatbot over on his X platform.

There's also the rapidly expanding StarLink satellite network that is pretty much the only player in the direct-by-satellite internet service provision market.

It sounds like SpaceX has a bunch of cutting edge tech operations under its umbrella, what could possibly go wrong?

Well the biggest problem is that the only one of these ventures that is actually turning a profit is StarLink.

Both its rocket operations and its AI venture are operating at a huge loss right now and without StarLink and its huge revenues, SpaceX would be nothing but a dumpster fire -- especially bearing in mind just how far it is behind its own projected targets for Starship, on which both the Moon and Mars missions that are dependent.

Fortunately, StarLink's future seems assured though, right?

The barrier to entry for any competitor is huge. Without a high-cadence relatively low cost launch service, none of the other direct-by-satellite internet services have a hope in hell of building or maintaining a constellation as large as StarLink.

However, it may not be competition that is StarLink's biggest risk.

Firstly, a significant solar CME, about as big as the Carrington Event, might be enough to inflict quite a bit of damage on StarLink's capabilities. It would be unlikely to completely destroy the service but it could result in dramatically reduced throughputs and potentially large holes in coverage. This would last until enough new satellites were placed into orbit.

Another looming threat is the Kessler Syndrome.

StarLink satellites operate in that dangerous part of space known as the Low Earth Orbit (LEO), typically around 500Km above the planet's surface.

Many experts have been warning for some time that it's not a case of "if" the Kessler Syndrome occurs, it's simply a matter of "when" -- and the time until then could be a lot shorter than we think. It could happen next month, next year or in just a few short years' time. When it does happen however, a progressively increasing number of StarLink satellites could be affected and simply firing new birds up to replace them will make matters worse, not better.

The final, and perhaps soon the greatest risk however, is that of a nuclear conflict taking place somewhere on the planet.

We're not talking global thermonuclear war, we're talking about even a relatively limited exchange of such weapons.

The effects of EMP and ionization of the upper atmosphere could effectively disable many satellites in LEO, including most if not all of StarLink and it would be some time before it became even remotely practical to start rebuilding the network.

From a risk perspective therefore, the SpaceX IPO is probably not something I'd be throwing much of my hard earned cash at. These risks may be low but they are very real and without StarLink's revenues, the value of SpaceX stock would tumble precipitously in a very short period of time.

So in summary, SpaceX is a venture that is highly dependent on the US taxpayer and faces significant risks from things beyond its control, such as the AI bubble bursting, acts of God and a rapidly changing geopolitical situation that could lead to nuclear conflict.

Of course I'm no investment guru and I would not suggest that anyone takes my observations as sage advice when considering where to put their money. However, I've seen far too many investors throw money at things simply because they're shiny and new -- rather than undertake proper critical due diligence (Martin Jetpack, Lillium flying cars, cough, cough, etc, etc).

To be fair, StarLink is a profitable enterprise with strong revenues and growth -- but it is also a single point of failure for the SpaceX empire.

Carpe Diem folks!

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