After a record-breaking initial public offering, SpaceX turns to the bond market to raise capital.
SpaceX SPCX | 0.00 |
June 22 (Reuters) - Elon Musk's SpaceX turned to the bond market for the first time, taking advantage of momentum following its initial public offering, which pushed its cash reserves above $100 billion, as the conglomerate, which operates in areas ranging from rockets to artificial intelligence, ramps up its spending.
Today’s bond offering comes just days after the company’s initial public offering, indicating SpaceX’s efforts to restructure its balance sheet by replacing short-term transition financing with long-term debt, which could help fund an ambitious and costly expansion into artificial intelligence and next-generation rockets.
The company's shares plunged nine percent in morning trading, marking a decline for the third consecutive session.
SpaceX was listed on the Nasdaq stock exchange on June 12 after raising $85.7 billion in its initial public offering, making it one of the most valuable companies in the world.
Musk retains 82 percent of the voting rights in SpaceX after the initial public offering.
Adam Sarhan, CEO of 50 Park Investments, said, "With Musk retaining overwhelming majority control of the voting through a dual-class structure, the bond issuance preserves the economic ownership of existing shareholders without the need to issue new shares."
He added, "Clearly, choosing debt over additional equity prioritizes avoiding further dilution of shareholders' stakes."
SpaceX has increased its spending on artificial intelligence infrastructure and the development of its next-generation Starship rocket, investments that have impacted profitability despite strong growth in its Starlink satellite internet business.
Revenue jumped 33 percent to $18.67 billion last year, despite the company posting a net loss following heavy spending and the merger of Musk’s artificial intelligence project, XAI.
The company did not disclose the size or pricing of the proposed bond offering. It stated that the proceeds would be used for general corporate purposes, as well as for loan repayments and to cover related fees and expenses.