Why a SpaceX IPO Hasn't Happened Yet

SpaceX IPOTesla Motors Inc. (Nasdaq: TSLA) Chairman and Chief Executive Officer Elon Musk has never shied away from the public eye.

This has many wondering why a SpaceX IPO hasn't happened yet.

After all, every other company he is involved with has gone public or has been swallowed up by another publicly traded company.

First in 1995, Musk and his brother Kimbal created Zip2, an online business directory and web-mapping service. Compaq Computer Corp. bought the service in 1999 for $307 million, which was then bought by Hewlett-Packard Co. (NYSE: HPQ) in 2002.

Then he founded X.com, the forerunner to PayPal. The online banking venture sold for $1.5 billion in 2002 to eBay Inc. (Nasdaq: EBAY). PayPal will split from eBay later this year and become its own public company.

As for companies that Musk is currently involved with, there's Tesla, which went public in 2010.

He's also chairman of SolarCity Corp. (Nasdaq: SCTY), the solar panel venture run by Musk's cousins, Lyndon and Peter Rive.

That leaves SpaceX, Musk's commercial space exploration company he hopes to one day use as a means to colonize space and make humans an interplanetary species.

The company is still private, and its budget books are hidden from the eyes of Wall Street.

Musk has had to absorb myriad criticisms for the financial troubles of Tesla. For most of its existence, the company has contended with the fact that it is largely unprofitable and a favorite target of short sellers.

Its doubters even included 2012 Republican presidential nominee Mitt Romney, who called Tesla a "loser" on the campaign trail.

Musk isn't afraid to address his skeptics in a very public way. His aspirations of turning the automotive industry electric, or transforming the U.S. power grid to solar energy, have already been deemed ridiculous and unworkable by no shortage of detractors.

So, why not a SpaceX IPO?

In Ashlee Vance's recent book, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future, we get a glimpse into why investors can't yet buy SpaceX stock...

Why Hasn't There Been a SpaceX IPO?

When looking at Musk's portfolio of companies, SpaceX diverges in this critical way from Tesla and SolarCity...

It's not that Musk isn't passionate about solar energy or electric automobiles, but neither company was really his to begin with.

SpaceX stockThere's SolarCity, where he is chairman and champion but not the founder or chief executive.

Nobody can argue Musk's contribution to Tesla and how important he has been to the ongoing survival of the company. But the fact remains that it was really founded in 2003 by Martin Eberhard and Marc Tarpenning. They did the initial legwork before Musk jumped in as an angel investor and later took over.

And even now with Musk as the face of the company, Musk and Eberhard have a lot of bad blood between them. The latter left the company in in 2008 disgruntled.

Musk did make Tesla his own, but as Vance wrote in his book, he was apprehensive at first to take the company to market in 2010.

"Musk has done everything in his power to maintain absolute control over his companies," Vance wrote. "Even if he remained the largest shareholder in Tesla, the company would be subjected to the capricious nature of the public markets. Musk, the ultimate long-term thinker, would face constant second-guessing from investors looking for short-term returns. Tesla would also be subject to public scrutiny, as it would be forced to open its books."

Musk took Tesla public on June 29, 2010, with a $55.9 million loss in 2009 on the books, and while investors have helped boost Tesla stock 1,357% since then, it has also attracted a lot of bears.

TSLA stock is shouldering a 25.7% short float. That is, of Tesla shares floated, 25.6% of them are held in short positions - bets on a falling share price. Compare that to the S&P 1,500 average short float of about 6%, according to BeSpoke Investment Group.

If Musk had reservations with taking an electric car company public, which isn't a particularly ridiculous idea, then just imagine the kind of public scrutiny a company with similar financial troubles aimed at colonizing Mars would invite upon itself.

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And that's what makes a SpaceX IPO so difficult. Employees think a SpaceX IPO will be a way for them to cash in on all the work that has gone into the commercial space venture, and they're wondering: When will SpaceX go public?

"The lingering question for many SpaceX employees is when exactly they will see a big reward for all their work," Vance writes. "SpaceX's staff is paid well but by no means exorbitantly. Many of them expect to make their money when SpaceX files for an initial public offering. The thing is that Musk does not want to go public anytime soon, and understandably so. It's a bit hard to explain the whole Mars thing to investors, when it's unclear what the business model around starting a colony on another planet will be."

Bottom Line: Musk is a rare kind of CEO with aspirations that far outpace his ability to fund them, though he is trying and by many measures succeeding to this point. The problem with SpaceX is that it represents both the height of Musk's lofty desires and it's his company he built from scratch, unlike Tesla or SolarCity. While he's done an admirable job of convincing at least some investors that electric cars can be a feasible business model - despite the troubled financials - he doesn't want to have Wall Street dictate the future of an interplanetary human species, an endgame that he is intent on achieving. Don't expect a SpaceX IPO any time soon.

Jim Bach is an Associate Editor at Money Morning. You can follow him on Twitter @JimBach22.

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