One of the most controversial aspects of Space Exploration Technologies Corp (SPCX +1.58%), more commonly known as SpaceX, is the significant ownership and voting control held by CEO Elon Musk. With 42% ownership stake and more than 80% of the voting power, Musk doesn't have to worry about shareholders potentially removing him, even if they disagree with the company's performance. The power Musk yields with the company has been one of the more striking and controversial features of the stock.
For Musk, however, the reason for this type of structure is simple. He says it's to ensure that he can remain focused on the long term.
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Musk's vision could take considerable time to play out
Musk sees considerable opportunities for SpaceX in the future, not only in space but also in artificial intelligence. Putting data centers into space and helping humans get to Mars one day are extremely lofty goals, which will likely take several years, even under ideal conditions. Thus, getting bogged down by shareholder expectations and needing to please Wall Street can be challenging while still focusing on the space's company's long-term goals.
In a recent interview with The Economist, Musk clarified why so much control for him is necessary. "I really just need to make sure that I can focus on long term," Musk said, believing that will give him sufficient power to control the path of the company. And by long term, he clarified he was referring to a time frame of five to 10 years.
NASDAQ: SPCX
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SpaceX's opportunities are significant, but the stock carries plenty of risk
In SpaceX's S-1 filing, the company outlined a massive total addressable market of $28.5 trillion, and that growth potential was a big reason investors were bullish about the stock when it first went public in June. The growth story was so compelling that even at a market cap of around $2 trillion, investors wanted to take a chance on the business.
However, SpaceX stock has proven to be volatile since then. On Friday, it closed below $109 and was down more than 50% from the highs it hit in June, when euphoria sent it to more than $225. This type of volatility may be inevitable around a company with such a high valuation and so much uncertainty around its future. With SpaceX unprofitable and needing significant cash infusions to grow in the long run, investors will need to be incredibly patient with the stock, as it may take a long time for the company to realize its goals.
