If you’ve been reading over the past day, you know that I yesterday wrote a piece wondering if the reportedly stretched finances of entrepreneur Elon Musk are of interest not only to Tesla Motors, the pre-IPO electric car company where he is CEO, but also of the space exploration company SpaceX, which Musk founded and where he is both CEO and CTO. (Musk, who made his fortune as a PayPal cofounder, has since invested nearly all of his liquid assets in the two companies.)
My interest was piqued after reading a WSJ piece that reported SpaceX “needs a cash infusion of more than $1 billion in the next year or two to reach its goal of transporting astronauts to the international space station later this decade.” The story went on to suggest that, between Musk’s already enormous financial commitment to the company (more than $100 million) and the Obama administration’s plans to turn space travel over to private companies, “U.S. taxpayers are the most likely source of future assistance.”
SpaceX board member (and fellow PayPal cofounder) Luke Nosek, told me today that Musk’s personal financial picture is irrelevant. The reason, he said, is that SpaceX is expected to be profitable this year, as it has been for the past several years, owing to some very rich contracts. One is with Loral Space & Communications. A much bigger contract, valued at $1.6 billion, is with NASA, which is counting on SpaceX, as well as one of its competitor, Orbital Sciences, to transport cargo to the International Space Station once it retires its last shuttle in November.
Tonight, Musk writes in with some more data points that are worth publishing. I’m running his note unedited. It doesn’t answer some questions I’d submitted to him earlier today, but considering that he’s running two hugely ambitious companies, as well as in the midst of a suddenly high-profile divorce, I’m frankly grateful that he responded.
SpaceX has over $2.5B in revenue under contract. Accounting rules require that revenue for long term contracts (over 2 years) be recognized as costs are incurred or milestones passed. For the past three years, revenue has exceeded cost on that basis and we expect that to continue into the future.
The reason for SpaceX raising money last year from outside investors was for working capital and to provide a financial cushion in the event of a Falcon 9 launch failure. We don’t anticipate needing to bring on additional investors and will not be conducting any equity financing rounds, although it is possible we may accept investment for strategic reasons.
Andy Pasztor’s article in the Journal was, I’m sorry to say, rife with errors. He was off by a factor of ten on what it would cost SpaceX to develop a launch escape system. Also, under no circumstances would SpaceX be seeking a financing round from the taxpayers. That doesn’t make any sense.
NASA is expecting to offer at least two contracts for development and demonstration of crew transport to the Space Station, as they have done for cargo transport. SpaceX will compete to win one of those contracts. For cargo transport, SpaceX won twelve missions and Orbital won eight. Orbital’s monetary award was higher even though they are doing fewer missions, because NASA didn’t want to depend on a single source. For crew transport, I would expect Boeing or Lockheed to win the bulk of the funding and hopefully we will be second.