SpaceX and Tesla (NASDAQ:TSLA) CEO Elon Musk is susceptible to hyperbole. Over the years, he is uttered greater than a few whoppers, lots of which have been faithfully recorded on the metaculus.com web site.
Remember how he predicted, again in 2016, that SpaceX would put a “Red Dragon” spacecraft on Mars in simply a couple of years? (It by no means occurred, and SpaceX later canceled plans to construct a Red Dragon.)
Or do you recall Musk’s prediction that Tesla would go non-public at a valuation of “420”? (That obtained Tesla in scorching water with the SEC — however with the inventory now buying and selling for almost 3 times $420, I’ll guess Tesla buyers are blissful the 2018 prediction did not come to cross.)
In 2019, Musk was so assured about progress on Tesla’s autonomous driving software program that he predicted by the tip of the yr, Tesla drivers may comfortably sleep on the wheel as their vehicles drove alongside autonomously. Full self-driving beta did not truly arrive till 2021 — and you continue to cannot sleep by way of it.
On the opposite hand, Musk has additionally hit surprisingly near the mark once in a while. For instance, in 2017 he predicted that Tesla would guide a revenue in early 2019 and stay worthwhile ceaselessly after. As it turned out, Tesla truly misplaced cash within the first quarter of 2019 — and within the second quarter of 2019 as properly. But within the third quarter — simply six months not on time — Tesla earned a $143 million revenue, and the electrical automobile firm has remained solidly profitable ever since.
But have you ever heard the Elon Musk prediction that might imperil his upcoming Starlink IPO?
Elon Musk’s newest prediction
In an inner electronic mail (that rapidly discovered its method exterior) in November, Elon Musk warned SpaceX workers of a “disaster” within the manufacturing fee of the corporate’s Raptor rocket engines — a disaster that was “fairly frankly, a catastrophe” and “a lot worse than it appeared a few weeks in the past.”
Failure to supply sufficient engines quick sufficient, warned the CEO, threatens to stop SpaceX from launching its Starship mega-rocket “at the very least as soon as each two weeks subsequent yr.” And except SpaceX does attain that flight fee, “we face a real danger of chapter,” stated Musk.
Press the panic button?
And but, whereas a number of information retailers reported on the Musk electronic mail, panic didn’t ensue. To the opposite, after years of being skilled to take Musk’s pronouncements with a few grains of salt, the house group largely accepted the CEO’s dire warnings with equanimity.
Local Texas newspaper The Austin American-Statesman, for instance, appeared skeptical of the proposition that SpaceX, which “has been valued at $100 billion in current months,” was actually liable to chapter. TheVerge.com, too, questioned whether or not “SpaceX is really in dire straights [sic].” And TheSubsequentWeb.com instructed that Musk’s actual purpose in sending out his electronic mail might merely have been to “stress employees to ship” on Starship’s promise subsequent yr.
(Don’t) panic (but)
I feel they’re proper.
At the center of the CEO’s concern is the truth that SpaceX needs Starship to offer the raise functionality — each when it comes to quantity and when it comes to mass — to fly SpaceX’s new Starlink Satellite V2 to orbit. Most of the income SpaceX expects to earn for itself in future years, in any case, will come from the corporate’s Starlink broadband satellite tv for pc enterprise.
As Musk explains, SpaceX is “spooling up [Starlink] terminal manufacturing to a number of million items per yr.” But it nonetheless must put a extra superior and “financially … sturdy” era of Starlink satellites in orbit to service all of these terminals on the bottom. Without the satellites, SpaceX’s hopes of turning Starlink into a $30 billion-a-year business may come to naught.
And but, regardless of utilizing phrases like “disaster” and “catastrophe” to explain the Raptor state of affairs, Musk says he is “assured” that Starship will attain orbit in 2022. For that matter, in tweets offering context to the leaked electronic mail, Musk later admitted that SpaceX is not actually liable to chapter — not except you first assume “a extreme world recession” that may “dry up capital availability” concurrently “SpaceX was shedding billions on Starlink & Starship.”
And even then, the CEO lastly admitted, chapter can be “unlikely.”
If a extreme world recession had been to dry up capital availability/ liquidity whereas SpaceX was shedding billions on Starlink & Starship, then chapter, whereas nonetheless unlikely, is just not not possible.
GM & Chrysler went BK final recession.
“Only the paranoid survive.” – Grove
— Elon Musk (@elonmusk) November 30, 2021
Granted, Musk in all probability ought to have included these caveats in his unique electronic mail. Then once more, that will have stripped the message of its sense of urgency. And the very fact stays that SpaceX actually does have to get Starship up and working — and fitted out with all of the Raptor engines it wants — with the intention to develop its Starlink satellite tv for pc constellation from the lower than 2,000 satellites presently in orbit to the 12,000, and even 42,000, satellites Musk ultimately hopes to launch.
$30 billion in annual revenues — and a planned Starlink IPO — rely upon it.
This article represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one among our personal — helps us all suppose critically about investing and make choices that assist us turn out to be smarter, happier, and richer.