A sustained competitive advantage is the best way to sustain a company's growth and raise its stock price. But it's not always obvious to the market where one company stands relative to its competitors. Elon Musk's SpaceX is the global leader in rocket launch services, and it's more obvious than ever.
One of its primary challengers, Blue Origin, founded by billionaire Jeff Bezos, recently had a rocket explode during a test launch. Beyond the explosion going viral, it reminds investors of the high stakes of launching powerful rockets into orbit. Here's why the Blue Origin explosion is likely to add more fuel to SpaceX's upcoming blockbuster initial public offering (IPO).
Image source: The Motley Fool.
SpaceX is still the industry leader, and it's not close
It's not that SpaceX hasn't had explosions during test launches. However, it's very different when you're the industry leader pushing new boundaries, rather than a challenger playing catch-up. SpaceX is currently the leader in the space launch arena. According to the company's recent S-1 filing, SpaceX rockets launch 80% of the world's mass (cargo and crew) into orbit. SpaceX's Falcon 9 and Falcon Heavy rockets are also reusable, dramatically lowering per-launch costs.
That dominance has helped it build out its Starlink satellite constellation to over 9,600 satellites in orbit, bringing connectivity to 164 countries to date. It also makes SpaceX an overwhelming favorite to land government launch contracts. The U.S. Space Force recently awarded SpaceX contracts totaling $6.45 billion, another reminder of the unmatched scale at which SpaceX operates versus its competitors.
The explosion only adds to the growing legend of SpaceX's IPO
It could be an understatement to call SpaceX's IPO a big deal. I mean, the company could go public at a market valuation of $1.77 trillion. It will be the largest IPO in history. As much as the Blue Origin explosion illustrates SpaceX's industry leadership, the IPO process has shown how hungry the market is to buy shares.
The committee that oversees the S&P 500 considered adding SpaceX to the index, which would have broken its rule requiring profitability on a generally accepted accounting principles (GAAP) basis, but ultimately decided against it. SpaceX is also holding firm on its IPO price of $135 per share, according to a Reuters report. A fixed IPO price isn't unheard of. The price is usually offered as a range and the company meets with institutional investors to help determine the final IPO price.
SpaceX must feel that it has the leverage to do this, based on the demand it senses for its stock. Now, whether it's wise to invest in a stock with such explosive hype is another story. Many hyped IPO stocks have burst onto the scene, only to tumble over the following months or years as that excitement quiets down. Despite its massive market cap, investors may want to treat SpaceX like a speculative stock and approach it with caution on the big day of its market debut.
