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Comment by Rebelgecko | Hacker News Reader

Can someone who knows more about the finance stuff explain why a company (especially one like SpaceX that prides itself on being super vertically integrated) would spin off a part of the business as a public company? Is it just to help employees whose equity is relatively illiquid? Is it to raise capital? Insulate the parent company from potential regulatory/legal issues?

Sidenote: SpaceX actually is sorta-kinda publicly traded. Alphabet and Fidelity bought ~10% of SpaceX. Fidelity has a few mutual funds that are partially invested in SpaceX (like 0.5% of the fund is SpaceX). I'm kinda surprised someone hasn't made a FauxSpaceX ETF that buys the Fidelity SpaceX fund and does some shorts/options to try and cancel out the non-SpaceX parts of the fund.

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As Tesla is highly valued, this looks like a great timing to go public and just raise cash for Starlink, and also for SpaceX investors.

Also it seems like the main reason Elon doesn't want SpaceX to go public is because he's afraid that short term looking investors would take control from him and vote the mission of colonizing Mars down.

Speculation: SpaceX maintains control by selling less than 50% of Starlink. This is essentially just asking the public if they would like to invest in the Starlink business with no change to operations.

I think so.

Starlink is capital-intensive and untested as a business proposition. This keeps the risk walled off from SpaceX and lets them raise without diluting ownership of SpaceX. (It also means guaranteed profit for SpaceX from the pockets of new investors.)

Not sure why they'd go public instead of raising the capital privately, though.

Well, they need to raise around $10B to get it fully operational, so that might be hard to do privately.

Also, perhaps Musk thinks that having public retail investors is worth it. After all, even though they contribute approximately 0% to Tesla's funding, retail investors and owners generate approximately 100% of the hype, online content and general proselytizing. That is, someone will have to defend Starlink from accusations that it has ruined the sky, and Musk alone can't do it.

Retail investors contribute to Tesla's financing by offering interest free loans in the form of pre-order deposits.

Those are customers, not retail investors.

A non-trivial portion of the hype around Tesla comes from shareholders. I've been hearing more and more people lament that they missed the boat now that the stock hit 700+. It seems like a genius idea to offer a new investment opportunity to the public. This should help generate hype for the Starlink network, which will live or die based upon its adoption rate.

Starlink is SpaceX’s only real “business” given that the global rocket market is still incredibly small. It may be valuable to raise a bunch of capital for it individually

How does the value of a private company affect the fund, if it is not being traded? Valuation at last round could be miles off.

It's privately traded. Employees receive shares.

I have 3-4 acquaintances who are very early SpaceX employees and my understanding from conversations with them is that they are not able to sell their shares at the moment.

This is second hand knowledge though, so maybe I'm wrong.

There is no liquidity for SpaceX employees at this time. This is based on my experience attempting a transaction without a forward contract.

They’ve occasionally bought shares back from employees internally alongside financing rounds, but those aren’t super frequent.

Starlink has a lot of business potential

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