SpaceX, the rocket company owned by Tesla boss Elon Musk, will go ahead with an initial public offer of its Starlink satellite business in the coming years, but the launch of a highly competitive broadband offer is not likely to be far, far away.
Starlink, which is creating a ‘constellation’ of satellites in a low orbit around the Earth by launching batches of 60 microsatellites at a time, expects to be able to provide high-speed internet access around the globe by the end of the year.
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Gwynne Shotwell, president and chief operating officer of privately owned SpaceX, said Starlink was the “right kind of business that we can go ahead and take public”.
She said the satellite arm was “likely” to IPO in future, Bloomberg reported from a private event in the US hosted by JPMorgan, while the company confirmed to Reuters that a listing would be not for several years.
Musk has said that SpaceX is not suitable for a public listing as the company’s goals do not align with shareholders, with the CEO confirming that an IPO would only happen when its rockets are successfully operating trips to Mars.
Launching a consumer ‘space broadband’ product is designed to generate enough money for Musk to complete his real dream of sending humans to live on Earth’s neighbouring planet.
Telecoms business by the end of the year
At the end of January, via its Falcon 9 rocket, SpaceX launched another batch of 60 Starlink satellites to take its total above 240 and Shotwell said the company expects a planned four additional launches to deliver global coverage by the end of the year.
She said Starlink’s low-latency, high-bandwidth broadband will cost “less than what you are paying now for about five to 10 times the speed you are getting”.
Low-Earth orbit networks (LEOs) offer secure point-to-point communications and some analysts suggest they could gain an edge against established telecommunication technologies such as fibre-optic, wireless and wireline telecoms, especially for video and drones for example.
Other telecoms companies better watch out, said Neil Wilson at Markets.com.
“I wouldn’t put anything beyond Musk these days. I think he’s brought a huge swathe of hitherto sceptical bods in the investment community around in the last six months, so there will be demand for this IPO.
“This could give other telecoms firms a run for their money but as ever there are execution risks.”
There are various well-established, quoted satellite operators around the world, including Eutelsat, Intelsat (NYSE:I), Iridium (NASDAQ:IRDM) and Viasat (NASDAQ:VSAT), but UK-based investors may have mixed feelings about the sector, said Russ Mould at AJ Bell after former FTSE 100-listed Inmarsat was taken over by a private equity consortium and Avanti Communications delisted after a calamitous, multi-year share price decline.
“They all have different customer bases and business models and in some cases they may view the low-earth orbiting satellite (LEOs) constellations envisaged by Elon Musk and Jeff Bezos as potential partners rather than rivals, though some may have good reason to fear the proposed launches of Starlink, Amazon, OneWeb, Telesat and others,” he added.
He said LEOs advantages over established telecommunication technologies could open up markets for corporate or perhaps even governmental and military customers.
“Equally, competition could be fierce, especially in the early stages, and participants will need lots of capital, especially as they will be up against some deep-pocketed rivals,” Mould said.
“The combination of lots of entrants, lots of early-stage risk, rich rivals and plentiful, cheap capital around the world does not smack of a scenario that promises instant profits – far from it.
“Space could still come into vogue as an investment theme, thanks to the efforts of Richard Branson, Elon Musk and Jeff Bezos - and central bank’s provision to markets of cheap cash and liquidity, but like any investment theme investors must approach it only after thorough research so they can assess the solidity of business models, the ability to turn concepts into cash flow and the valuations they are paying to access that cash flow - assuming there will be some in time.”