School IB business management class: SpaceX boosts IPO ambition with plans to raise $75bn

This article picked by a teacher with suggested questions is part of the Financial Times free schools access programme. Details/registration here.

SpaceX, founded by Elon Musk, is planning what could become the largest initial public offering (IPO) in history. The company aims to raise around $75bn. This is significantly higher than the current record set by Saudi Aramco in 2019, which raised about $25.6bn (and later increased to around $29.4bn with extra shares).

The proposed move represents a major shift from being a privately held company to publicly held company, with the shares being traded on the Nasdaq, the world’s first fully electronic stock exchange, founded in 1971 and based in New York City. The change would give an estimated valuation for SpaceX of between $1.75tn to $2tb and highlights the importance of financial markets in funding business growth.

However, the IPO raises concerns about overvaluation, investor risks, and corporate governance, particularly due to Elon Musk’s strong influence over pricing decisions. The case also shows potential stakeholder conflicts between founders, investors, and regulators, alongside the challenges of balancing rapid expansion with financial stability.

Read the article below and then answer the questions:

SpaceX boosts IPO ambition with plans to raise $75bn

1.2 Types of business entities

• Explain the reasons for moving from being a privately held company to a publicly held company

• Explain the advantages and disadvantages to SpaceX of being a publicly held company

1.4 Stakeholders

• Explain the reasons behind SpaceX’s external growth strategies

1.5 External growth

• Explain how raising $75bn supports SpaceX’s growth objectives

3.2 Sources of finance

• Explain the importance of external sources of finance for large companies like SpaceX

3.8 Investment appraisal

• Explain why investors may see SpaceX as high-risk-high-return

• Discuss the issue of overvaluation of a company, such as SpaceX, in financial markets

BMT 3 — STEEPLE analysis

Discuss how government regulation shapes the business strategy of SpaceX

Key concepts

• Discuss how SpaceX’s move from being a privately held company to a publicly held company creates potentially positive and negative organisational change

• Discuss why concerns about Elon Musk’s ability to influence IPO pricing might raise ethical issues

• To what extent are SpaceX’s long-term investments in space exploration sustainable?

• Discuss how firms such as SpaceX can use creative approaches to attract investors and fund ambitious projects

Set 1

• State two features of an initial public offering (IPO) [2 marks]

• Explain one advantage and one disadvantage for SpaceX going public on the stock exchange [4 marks]

• Using stakeholder theory, explain two possible conflicts arising from SpaceX’s IPO [4 marks]

Set 2

• Define the term equity finance [2 marks]

• Explain two reasons why external sources of finance are important for companies like SpaceX [4 marks]

• Explain one advantage and one limitation for SpaceX operating on a larger scale [4 marks]

Paul Hoang, InThinking