SpaceX Holder Says Orbital Data-Centers Offer Big Payoff, Risks

SpaceX’s $1.75 trillion initial public offering highlights the potential upside — and downside — from Elon Musk’s bold vision to place data centers in Earth orbit, according to one of the company’s private investors.

“The orbital data center is the next hypothesis that they are seeking to validate, but everybody should be totally aware of the risks that are involved,” said Peter Singlehurst, head of the private companies team at Baillie Gifford. “In the event that they prove it, the payoffs will be large.”

The IPO represents the culmination of a 15-year trend of companies staying private longer, with Space Exploration Technologies Corp. going public at a valuation 900 times larger than Tesla Inc.’s 2012 listing, Singlehurst said Wednesday in a Bloomberg Television interview. Baillie Gifford also backs AI company Anthropic, whose business models are now overlapping as SpaceX positions itself as an AI infrastructure provider.

SpaceX is set to price its $75 billion IPO at $135 per share, the largest IPO in history, surpassing Saudi Aramco’s $29.4 billion record from December 2019. Part of Musk’s strategy calls for building data centers in space, taking advantage of SpaceX’s launch technology to position the facilities in orbit, separating them from terrestrial electric grids and human neighbors.

Different Baillie Gifford funds will likely take different positions on SpaceX following the IPO depending on their exposure history, Singlehurst said. Funds that owned SpaceX since it was valued at $30 billion have very large positions and may need to sell down even while maintaining meaningful exposure to provide clients with diversification. Public-only funds face the question of whether to buy.

“There is universal agreement that SpaceX has been an exceptional company,” he said. “The real question from here is what is the right price and what is the right position size?”

Singlehurst said SpaceX’s listing underscores the need for investors to be in private and public markets, rather than dividing these approaches. It is “very hard to see how you could see SpaceX delivering the same kind of returns as a public company as Tesla did,” he said, alluding to the 24,000% run-up for the stock since June 29, 2010.

SpaceX has continuously tested and validated a series of “outlandish hypotheses,” from the original business concept to reusable rockets and Starlink satellite internet, Singlehurst said.

(This story was produced with the assistance of Bloomberg Automation.)