SpaceX turns to bond market as billions wiped off company value

Company seeks to raise $20bn in new debt to repay bridge loans

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After its sizeable stock market flotation, SpaceX is preparing to tap the bond market. The company is looking to raise at least $20 billion dollars in debt, possibly as early as this week, reported The Wall Street Journal. According to sources, the underwriters were in talks with potential investors on Monday, aiming to possibly set the final price of the issue as early as today.

The move comes at a time of considerable volatility for the company and the wider tech sector. Despite a record-breaking IPO that raised more than $85 billion and initially gave a boost to the main market indices, SpaceX’s share price recently fell by 16%. This meant the stock logged three consecutive days of losses. It closed on Monday at $154.60, well below the peak of $225.64 on 16 June. From a peak market capitalisation of $2.9 trillion, the correction has brought it down to $2 trillion, a decline of $900 billion.

Jay Hatfield of Infrastructure Capital Advisors noted that the current market climate is unfavourable for companies seeking additional capital, a trend that has had a negative impact on SpaceX.

Despite the turbulence in the stock market, conditions for corporate borrowing remain favourable. Although the yield on 10-year US Treasuries, at 4.507%, is relatively high, the small spread between high-rated corporate bonds and government bonds points to strong investor demand for corporate debt.

SpaceX plans to use the funds mainly to repay a bridge loan, although it may also allocate capital for general corporate purposes. While major rating agencies such as Fitch, S&P Global and Moody’s have assigned the company an ‘investment-grade’ rating, they have emphasised a mix of risks and advantages.

The company’s dominant position in rocket launches and its historically low debt levels are seen as strengths. Set against this, analysts are concerned about Elon Musk’s absolute control over the company and the costly, uncertain nature of monetising the AI initiatives.

Business AM

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