Latest / Money Grows on Trees / #324 - Is SpaceX An Opportunity For The Average Aussie?

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#324 - Is SpaceX An Opportunity For The Average Aussie? · Money Grows on Trees

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SpaceX is either the greatest investment opportunity in a
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generation, or it's the most expensive mistake you'll ever make.
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Most people think it's a no-brainer. Elon Musk, rockets, Starlink,
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the future. But is it just all hype from
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an investment standpoint? Because SpaceX just filed for
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its IPO, its initial public offering, where it initially offers shares
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to the public. That's what IPO stands for. So the window to
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understand this opportunity is closing. My name's Lloyd Ross, multiple
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seven figure entrepreneur and investor, and I've helped thousands of everyday Australians
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to pay off debt, invest, build assets, and real wealth.
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And in this video, I'm gonna show you exactly how the
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SpaceX IPO works, how to access it,
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what it means as an investment for you, and whether it belongs in your
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portfolio or not. All right, so let's dig straight into it. Is
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SpaceX a good idea? And the reason we're doing this episode is
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because, of course, when incredible companies like SpaceX
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go to list on the stock exchange, it means we, the public, can buy legal
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equitable ownership of pieces of the business. That's what shares are.
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They're a share of a business. And what a business, right?
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And not in terms of the financials necessarily, but what it can do or
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what it's doing for human civilization. I would
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say there are few companies that are going to
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have an impact on the civilization to the extent that SpaceX is. It
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could, it's like the, it's like General Electric, it's like
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light bulb. This is one of the most incredible industrial
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developments of our race, of
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the humankind, right? It's that important. Because not
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too long ago, before Elon really spearheaded this, like a freak, after he sold
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PayPal for, well his share of PayPal for 300 million, he literally put, I
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think half into Tesla, And then he put half into SpaceX,
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the two most hardest things, rockets and electric cars, and
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has had tremendous success in both amongst other things. So this
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is a guy who means business, right? And the reason why he spearheaded that is because he discovered
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that the reason we haven't gone to space and back to the moon, etc., and
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kind of moved into that realm is because it's extremely expensive to launch rockets.
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The reason being is not just the fuel cost, of course, but it's actually the fact you've
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got to rebuild the rocket once you use it. And so it's like having a commercial
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airliner like a Boeing 747, and you fly to, say, London
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to New York, and then you get to New York, and then you've got to just throw the plane out.
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Like, could you imagine how expensive tickets would be if you had to do that?
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But that's what happened to space effectively, right? So, what
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he discovered through development of the Raptor engines, development of
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the rocket design, and of course, as we know, the
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ability to bring it back to Earth and land it, whether it be in the ocean, on a
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pad, or on land, or even
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tweezers, because the Starship, which is the largest flying
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object ever created by mankind. He brought it back to Earth
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and caught it in these, you know, this docking bay, which is effectively two, like,
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two big steel tweezers. And they did it the first go, which is amazing.
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But if you've been following Elon's journey with SpaceX, it's been very incredible to
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watch, very inspiring, of course, and great for civilization. Okay,
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so they've been able to cut rocket development and redeployment cost
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by 90%. So it really cuts, cut the cost of
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going to space by 90%. The third launch was
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where it was either, they had enough money for the third launch and if that
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had failed, they would have been game over. And they
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did it. So we were a breath away from not having this. And
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it may have set civilization back a long way. So thankfully, God
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was in our corner, or in Elon's corner, and it happened. Then
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they were able to bring it back to Earth, which is crazy, right? So now, I think
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he's launching rockets all the time. Bang, bang, bang. So he's really commercialized
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Space, right? He spearheaded that. And
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so as part of that process, they developed these offshoots too, you know,
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like it made putting satellites into orbit cheaper.
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It enabled going to the space station cheaper. He recently just rescued
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people who were stranded in the space station. It's just being
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able to access space a lot more affordably has created
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other industries like, you look at Starlink, which is effectively a
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series of satellites that just put internet down to the earth through a Starlink device
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anywhere, which is amazing. It's connected remote
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communities like never before. It's connected people during war. It's connected people
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during disaster. It by itself has been a byproduct of
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the success of SpaceX, right? There's like, I think there's 9 million subscribers
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now in Starlink alone, so he's got these other Businesses
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that have you know? Developed off the side of it, which is completely
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changing how we live right Starship is
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the is is purported to be the vehicle that takes us
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to Mars, and it seems like now That's an actual real or
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so what's that is very audacious is now becoming more measurable and
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achievable right so you can see that SpaceX is changing
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the arc of human civilization period right
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But here's where the conversation changes
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when you start to consider it as an investment. So
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before I jump into the numbers and just talk about what it looks like,
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I have to explain this to you. This is
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not the first industrial revolution we've experienced, okay? So
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you have these new technologies adopted and we
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have this rush to develop it, compete with it, whatever it
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might be, because, you know, people don't realize this, but SpaceX has competitors. Blue
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Origin is a big competitor and Jeff Bezos developed that company out of the
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profits from Amazon and they also launched to orbit. So it
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already has competitors. It's not the market owner of the entire
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market, okay? Because when there's profits to be made, you
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can bet your bottom dollar there'll be competition. So
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when there's an industrial revolution, I want to give you an example. When railroads
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became the, oh my god, I can't believe we can cross America in this time frame,
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in this locomotive. This is mind-blowing. It's like going to
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Mars. It's like, whoa, right? So that's happened. And
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so when you look at the industrial revolution, certainly industrial developments,
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there's a bubble scenario that happens where a lot of capital runs
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to that area for fast investment returns. There's this
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first mover advantage that happens. So the railroad is
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developed. And you could even say that United Pacific Railroad
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is one of the first few that was opened by Lincoln in the 1800s.
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But all of a sudden, there was like 200 railroad companies joining the fray. And
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of course, when you invested in railroads, in stocks, a lot of
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people lost a lot of money. Because just because it's good for civilization doesn't
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mean it's good for your portfolio. The same can be said for airplanes. When
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the Wright brothers lifted off, I think it was in 1906, thereabouts, They
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lifted off and created flight for the first time. Now, fascinatingly, 60 years
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later on the moon. Incredible developments. But, if
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you had invested into airlines back then, there was so many different airlines
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developed and competed with, that if you had to put your money in there, the chances
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you went bankrupt are extremely high. It was almost probably 100%. Because
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airlines are an awful, awful investment for return on
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capital. They burn through capital. They don't generate additional
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capital returns. Railroads, airlines,
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motor vehicles. There were in early 1900s when motor vehicles
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were adopted commercially and horses became, you know, obsolete.
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There was 200, 200, 200 car manufacturers in the United States alone. And
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guess what? There was two. And one went bankrupt in
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2008, which is GM. There was one, which is Ford. It's the only one left. So
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you had to pick one in 200, right? So this is what
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happens when there's an industrial bubble. And this will continue
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to happen. The dot-com bubble happened with internet companies. You could say the
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same thing is happening in the crypto markets. You could say the same thing in
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the AI space right now. It's a wash with capital because
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people, they mistakenly think that new and
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innovative is good investment, and that is absolutely
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not correlated, just so you know. Because I gave you the examples, how
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you put your money in those things, you're lost, right? So that's
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important for you to understand, right? Just because it's new, doesn't
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mean it's a good investment. They're really clear, right? So let's
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have a look now at SpaceX, the business, because if we're going to
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assess whether it's good for our capital to buy shares in this business, we
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have to understand the business. That's what you've got to do, right? So let's
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have a look. 2024 revenues of SpaceX around about, call
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it $13 billion. Last year, 2025, about
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$15 billion. I believe now in 2026, it's probably
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around $20 billion. I'm just giving you some highlights here
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so you can understand why. it's not really worth,
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I haven't really taken the time to invest deeply because it's not worth my time because it doesn't tick
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the boxes at all for me to deploy capital for investment. So I'm not
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gonna waste my time. But I am gonna explain a couple of things that makes it
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an automatic no, okay? Doesn't mean that people
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aren't gonna do it, but I just wanna showcase for you how quickly
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you can identify, ah, it's just out of my remit, yeah? Because
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you don't have to swing at every pitch, as Warren Buffett says. You wait for the fat pitches
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come down and swing at what you understand, what you know, and what's gonna scale over
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time into the future, so you don't have to make decisions on when you should sell. And
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that's the real guts of how good quality investing, certainly how
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I do it, and how others like Buffett have done in the past. So,
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here we go. It earns about 20 billion. in revenue, that's
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top line sales revenue, okay? And the
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current private valuation, they say is around 800 billion,
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okay? If you were to buy
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it privately now. The IPO target, so when a company IPOs,
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an investment bank underwrites the shares and underwrites the offering, and
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then goes to the public through the exchange and attracts attention
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to get investors to put their money in to then basically give
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money to the owners. Because when a company IPOs, like SpaceX, Elon,
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who owns I think all of the company, well, doesn't own all of it, Google owns some of
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it, et cetera, there's some private investors that have added
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equity capital to the valuation, but he owns a lot of it. So when he
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sells to the marketplace on an exchange, he's actually exiting. He's
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exiting a portion of his ownership of the business. He's
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selling a percentage ownership, and it might be 40, 50, 60% of the company or
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more, He's selling that
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to the public and he's taking the money in return. Does that make sense? He's
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actually selling a portion of his ownership to the public. That's how it works. He'll
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retain ownership and a lot of owners retain 20% or whatever
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it is of their company. So they've got ownership and control. They want to own more than 20% to
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exert control at the board level. generally. So that's
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how it's an exit from the private equity. And it's also
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a way to capitalize the company with the new
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proceeds. So when they sell part of the company, they get cash in
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return. And let's say an IPO is 1.5 billion. Sorry,
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1.5 trillion, which is what they're estimated it's going to IPO at, and some even say
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2 trillion. You say, okay, well, they've sold X amount,
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say 50% for 2 trillion, they've got a trillion in cash, just
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bang in the company. Like, now we can really expand, now
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we can build multiple Starships, now we can do this, now we can get more stuff, now
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we can invest in the company. So then they take those funds and they
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start to then deploy that to grow the business. This is how Private
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companies become public companies, and this is why they do, so they can grow. They're
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taking capital from the public to say, guys, we're on mission here,
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we've got this great opportunity, give us your money and we'll grow. Now,
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as a shareholder, do you think that
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at $20 billion of revenue, that SpaceX's
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valuation of $2 trillion is fair and equitable? Do
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you think you're buying a business that's undervalued? Do you think it's a business that's
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going to last? And the reality to these questions is, one, We
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don't yet know or can see what the net income of this business
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is going to be. We also don't know in the next 10, 15, 20, 30, 50 years
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if it's going to exist. We just don't know these things. This is so difficult to
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determine. The reason why the $2 trillion market IPO
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estimate is around is because people are pricing
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in that SpaceX is going to
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be the absolute market leader, dominate the
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market position of space travel and space logistics and
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the income that that type of market share
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can generate, just from that business alone, they're obviously saying
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that's going to be a lot. And they want to own a piece of that. And
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I know it makes sense, it does. It's like, wow, that's amazing. But let's understand this
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for a second. At $2 trillion valuation, It's
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like, what's that? A hundred times? A
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hundred times sales. You
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know, to put that in perspective, don't beat
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me up in the comments for this, but we have a laundromat business, I've mentioned it before. We
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bought that for 1.5 times sales. So our earn back on
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a revenue standpoint is 1.5 years. And earn back from sales
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to valuation of this company, if it IPOs at
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2 trillion, is 100 years. That's on revenue, not even on
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earnings. If it's on earnings, it could be 100. So the
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public is, or the market is anticipating that this company will
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generate profits so high that they
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still think it's a good deal even at $2 trillion. Does that make sense? So
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let's put a gauge right on the ground here. Let's understand
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what they're asking for and
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what the opportunity is. So here you have, in the
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investing world, you have your capital, your money, and you have
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all these opportunities in the investing universe, different types of assets. Whenever
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you invest in one thing, you say no to another thing. And the whole objective
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of investing is to buy a bush that
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has some birds in it, you hope, and what's the likelihood
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that you're going to get the birds out? Bird in the hands, worth two
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in the bush. That's investing. The
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challenge with SpaceX is we don't know how many real birds and net income are going to
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come out of the bush and we don't know when. And we don't even know if the bush is going to be around. Who knows?
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It's a new industry, right? Let's look at a bush that's
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been around for, say, 20 years. or
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thereabouts, and let's look at the birds in that bush, let's
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look at the valuation of that opportunity that you can buy today in the marketplace, and
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let's then assess where your money is better spent. Here's
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the example. Investing is best done when you compare
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two things with each other. Should you put your money here or here? So
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let's look at Meta. Meta is obviously the
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company that owns Facebook, Instagram, and WhatsApp as the core apps. They've
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got three billion people or subscribers to their apps, and
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they generate a tremendous amount of free cash flow and run by Mark Zuckerberg,
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okay? So one of the most profitable companies ever built. And
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owner led, founder led, and by all accounts, yeah, generating tons
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of free cash flow. Selling for a very reasonable price, right? So have a look at this. 2025 revenue
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for Meta, 200 billion, okay? So
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we have SpaceX, 20 billion. Meta,
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200 billion in revenue. 10 times more revenue. SpaceX
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valuation upon IPO is between 1.4, 1.5 to
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2 trillion. Meta, current
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market cap, if you bought the whole company, currently selling on the exchange, you can buy shares
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in today, 1.45 trillion. So if you look at
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that very closely, Both 1.45 trillion, roughly
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1.5 trillion. One's got 20 billion revenue, one's got 200 billion
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revenue. Which one
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are you buying? Does that make sense? SpaceX
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more or less earns 13 times less revenue than Meta, and SpaceX is
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roughly valued at the same price. That's what we're trying to understand here, okay?
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And what's interesting about that is we know, we
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already know that Meta generates income. We know it generates return
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on capital. We know that it's a proven product. We know that it's already got
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competitors. We know that those competitors haven't killed it. We know it
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doesn't rely on contracts from NASA. It relies
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on payments from the public for its advertising business and
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its subscription-based businesses. And it's got a lot of untapped potential in
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its WhatsApp enterprise, etc. And it's proven to
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be able to pivot when things got hard. So
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we have a very, we have a proven bush with birds in it
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that we know how many birds are coming back. We have that. So that's our option. You
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either buy Facebook for seven times revenue or do
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you buy SpaceX for whatever it is, huge amounts of multiples of revenue.
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Like which one do you buy, right? And so that's
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the, that's how you ought to assess investments. And
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I think a lot of people are gonna treat the SpaceX investment because
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of the excitement and this, image in
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their head that, oh, they're going to own space, or I want a piece of it. It's going to compel them
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to overpay for something that they don't
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really truly know the value of. Because generally with IPOs, the objective of
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the investment bank, too, is to pump up the price and get maximum
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price. They want to sell those shares at a maximum price. Very
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much similar to when you buy a car. They want to sell that new car to you
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at the highest price possible, even though when you drive it off, it's worth half, whatever. It's
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the same. So generally speaking, not always, but
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IPOs are notorious for selling
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shares to the public for the company at an extremely
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high nosebleed valuation. That's almost
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criminal. Just so you know. Some
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examples of where that's happened and I've seen it happen and I've even suggested not
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doing it to people just in passing and they still do it. I'll give you a
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few examples here. When F45, and I know
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these companies are different to SpaceX, I understand, but it's the same emotional
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reaction. When I was doing F45, I said, you know, Jim,
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if you don't understand what an F45 studio is, it's fitness, group fitness. It's
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one of the first group fitnesses to scale. It IPO'd. Right,
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it went IPO and I think they IPO for 600 million and
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the shares at the time was selling for $17 each. It IPO at
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$17 a share and one of the trainers was like, I bought shares, I bought shares,
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did you buy any shares? I'm like, I wouldn't touch that with a 10-foot pole. Like,
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why not? I'm like, I work here as well, I love the code. Like, you
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don't understand IPOs, like you just got ripped off. And then now if you
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go and look at F45 shares, there's 6 cents. You
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went from $17 to 6 cents, they're never gonna get their money back. So
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this is a very good way to lose money. If you wanna throw money on the fire and burn it, go and invest
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in IPOs. And I, same thing can happen with GoPro. And
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so my brother-in-law said, I think I'm gonna buy shares in GoPro. I'm like, why? He goes, because I use
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GoPro, I love it. I was like, ah, I probably wouldn't do that. He's
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like, okay, cool, I'll take that on board. And he didn't, which is great because I think it IPO'd at,
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I don't know, it was like $200 a share. Now it's like, I don't know what it is now, I think it's two. I
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think it's just like a hundred times less and you're never gonna get your money back. And
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there's countless examples of that. If
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you even went into call to chat and said, what's the percentage of people that really make,
18:51
generate long-term returns from IPOs? This is not a great deal, okay?
18:55
Just quickly, if you're ready to take control of your finances but feel stuck on
18:59
where to start, I have a solution. My book, Money Buys Happiness,
19:03
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19:06
you achieve financial peace. Get your copy via the
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link in the show notes and let's get your money working for you. Now back
19:13
to the episode. So is SpaceX an effective company for
19:16
civilization? Yes. Does it make money? Yes. Will
19:20
it continue to prompt profits in the future? It looks like it will. There's a high
19:23
likelihood, but we don't know. Starling a great business? Yes. Will it
19:26
continue? Probably. To what extent? We don't know.
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Right. So there's just a lot of unknowns.
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And what we definitely know is that if we don't know those things, then
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how do we really know if it's worth $2 trillion as
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a whole company? And the alternative argument
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to this question is, well, Lloyd, it's got almost supreme market
19:49
share. It's run by the craziest, most intelligent, flippant entrepreneur
19:52
of all time. It's got a ton of investment from
19:56
people like Google, et cetera. I think Google owns 7%. It's
20:01
likely to print. I'm like, sure. But what do the competitors look like
20:04
in the next 10, 20 years? What is the return on capital of those investments they
20:08
make? Because if you think about what they're going to spend money on, rockets, fuselages,
20:12
missions to Mars stuff, it's going to burn through a ton of capital. So
20:15
this company might rely on multiple share
20:19
raises, so where they can sell more shares. And just
20:23
doing that all the time to afford this mission to Mars is
20:26
going to dilute the current shareholders more and more
20:29
and more and more. Because if they keep selling more shares and more shares to raise more capital to
20:33
burn to get to Mars, which they look like they're going to, there may
20:36
not be a commensurate return for you, but also you're going to dilute the current shares that
20:39
are outstanding. There's going to be so many of them. So you could see this $2 trillion
20:43
valuation, it may not fall, but certainly with dilution it
20:47
may not also grow. So you may keep your money in there for quite a long period of
20:50
time until there's good long-term net profits and it really commands and owns
20:54
its market space. It's very difficult to know, which
20:58
is also why It doesn't really
21:02
get my attention to deploy capital because there are
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too many unknowns. And I want to impart this lesson to you.
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The objective of investing is not to punt. There's this
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great metaphor that Warren Buffett uses. He says, he's
21:16
not looking for 10-foot bars to jump over. Meaning
21:19
he's not looking for something very complex like this to figure out. What
21:23
he's looking for is one foot bars he can step over.
21:27
So an example would be he's looking for say, let's go throw this up there,
21:30
a company that's worth a trillion that's selling for
21:34
a hundred billion. He's looking for a company you can buy, where
21:37
they've mispriced their real estate assets, and you can get it for free. He's
21:41
looking for basically to buy dollar bills for 50 cents with no risk. That's what he's
21:44
looking for. And he did that recently with these Japanese companies.
21:48
He bought them for, you know, probably a third of
21:51
what they're worth, if not more, and they've been around since 1850. He's looking
21:56
for that, because he's looking for certainty. and
22:00
he's looking for certainty at a cheap price. And this is the
22:03
opposite of that. There's a lot of uncertainty and a very rich price. So
22:07
this is the opposite of what Warren Buffett, the greatest investors
22:11
ever lived, does. And I think that just imparting this
22:14
wisdom to you will help you understand why this
22:18
type of thing doesn't get my attention, but also why it
22:21
does get a lot of people's attention, because they get emotionally brought
22:24
into the mission, they want to be part of it. And they see a chance
22:28
to make considerable amounts of profits in the future. And they have seen that happen in Tesla,
22:32
even though Tesla is about Hunt
22:37
100 it's probably you know 20 times overvalued It
22:42
really shouldn't be at the valuation. It's a it's like a the peer multiples about
22:46
200 which means it takes 200 years to earn back its its market cap
22:49
and income and They've but they've seen that this is cult following with Elon where
22:53
the public doesn't care they just pumping money into the stock price and
22:56
I think that the house cards will fall on that at some point and
22:59
That's a very difficult investment journey to go on because
23:03
you're trying to ascertain the future with
23:06
a crystal ball and you can't, and you're going to watch this stock price go up and down
23:09
and it's going to send you insane and you're just not going to find this rhythm in
23:13
building capital. Just out of my experience, okay? It's
23:18
not a new story. This has happened before. It happened with Cisco in
23:22
2000, as I said, with the dot-com bubble. It happened with railroads. It's happened with cars. This
23:26
is an industrial evolution for
23:30
humankind. It doesn't necessarily dictate good idea or
23:33
good way to certainly compound my capital. The
23:37
same can be said for many, many other examples that I won't go into. So
23:41
what we have to understand is, is it a good company? Yes. Is
23:45
it a great company? Yes. Is it insanely good for humankind? Absolutely. Is
23:49
it a company that's really set up for good investment? I
23:53
don't think so. So you can be 100% right
23:56
on a good company, but you can be 100% wrong on
24:00
whether it's deserving of your capital. Does that make sense?
24:04
So let me finish with this question. Should
24:08
you participate? Should you bother? This
24:12
is why you watch this channel, to get an idea of really what
24:16
goes on with why don't I touch that, right? So here's my
24:20
absolute honest take on it, right? I personally don't
24:24
touch IPOs, period. It's just a rule. So I don't even
24:28
consider it. So like when there's an IPO, I go, stripe IPOs, this IPO,
24:31
that, doesn't matter. It just doesn't even, it doesn't
24:34
make it through that first litmus test. So straight away, boom, right?
24:39
And you can look at other things and say, well, Google owns and so forth. Well, if you want to have some
24:43
exposure to SpaceX, what you could do
24:46
is you could hold Google. Now, if you look at Google, even though
24:49
it's priced at about 26 times current earnings, which is not cheap,
24:53
for a company that owns like the Android phone market and
24:57
has market leading positions in like four to five big categories, and
25:01
it owns a bit of SpaceX and Anthropic and so forth. So if you look at that, and
25:05
Warren Buffett owns it, he's got like four billion or five billion in Google stock. So
25:08
if you have a look at that, You can get exposure to
25:11
SpaceX for Google. Now that's a more intelligent approach. That's
25:14
how I would get it. If I wanted any exposure to SpaceX, I'd
25:18
consider it through a Google exposure because you're getting
25:21
some there but you're getting a broad base of wonderful businesses under the
25:25
one banner of Google and it's selling for a fairly reasonable
25:28
price based on its current ability to print profits. And
25:31
it's got great leadership. So I think that's a more sensible approach to it.
25:35
Don't get caught up in this whole hype. Well,
25:38
I don't have my own rocket company. Well, just
25:42
know that you're on the losing end of that deal when an IPO is,
25:45
just so you know, okay? The crowd will follow and rush, institutions
25:50
will go with it too, and you'll get caught up
25:53
in the fray and you'll probably get killed. And if you do make money, you're trying
25:57
to repeat it, thinking you're smart, and then you'll lose money in the next
26:00
IPO. So I actually don't think there's a win-win outcome here.
26:04
I think there's actually a lose-lose. I don't think it bodes well. It's
26:08
not what I'd approach. It's not how I'd do it. So where I land on this is, magnificent
26:12
company, one of the great companies of our era. I want it to
26:15
succeed. It will succeed. Starlink will succeed. It will succeed. Optimus,
26:18
I mean, well, let's say Elon's doing anything, it'll succeed, right? I want to go to
26:22
Mars too. But I would not buy SpaceX in an IPO
26:26
just because of that. So I hope that makes sense. I hope that gives you a bit of
26:29
an understanding of how I come to that decision and
26:33
how you can too. Because part of this channel and
26:36
our podcast is to just give you some some
26:40
boundaries to play within that's gonna not wreck you because wealth
26:44
building is a long game and we wanna keep you moving and growing. So
26:47
I hope that makes sense. I'd love to know, what do you think about the SpaceX
26:50
IPO? Are you buying any? What's your alternative position on
26:54
that? What did you take away from this episode the most? I'd love to know in the comments. Leave
26:57
me a question or a comment below. I'll come back and reply. And of course, if you haven't done
27:00
so, boom, boom, hit the subscribe button so you get notified straight away and share