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Comment by somat | Hacker News Reader

A stupid/naive question. Why does this affect SpaceX? They have their money(The IPO) Any third party trading value does not change that. Sure there may be individuals, officers of SpaceX who hold these instruments who will be negatively affective, but the company itself?

My best guess, it makes it harder to get loans in the future.

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> My best guess, it makes it harder to get loans in the future.

Which is pretty important! It's my understanding that from all that money they raised during their IPO, a good amount of it went right back out the door again to pay off misc loans for the twitter acquisition. They may only have bought themselves 6 more months of time given their purported burn rate (mostly driven by AI investment), so they're going to need more loans really soon, or another major stock offering.

> They may only have bought themselves 6 more months of time given their purported burn rate

If they had only ~6 more months they (+auditor) had to issue a warning. The 6 is not a hard number, AFAIK, but surely a point where it must be reported.

So honestly, I doubt it's the case.

At least as written, GP says bought them six more months of time. Not implying they had 0 months to begin with.

That was indeed my intent. Pre-IPO, SpaceX already had _some_ cash in hand, and was burning >4b per quarter IIRC; so presumably _some_ runway. That said, they also got the anthropic/openai monthly payments coming in soon (already started maybe?). The next earnings release will be the interesting one IMO.

You will note that with the unlocks coming there is going to be a lot more spaceX stock on the market quite soon..

Currently 4.9% of the company is on the market.

Mid Aug... 15%...

40% by December.

Elon unlocks next June. Could be quite academic by then.

This is about their bond, not that share price. If you are in the US, it's like having low credit score, everything you want to do financially such as leasing or financing a car, buying a house, etc.. will be more costly (higher interest rate) from the lender.

Except that it's not clear really that lenders will be able to judge on that basis alone. SpaceX is a different kind of unicorn: it's a government contractor run by the richest man in the world who controls a media echo chamber and gets people elected.

That article compares them to Oracle. Who are, as it goes, pretty similar: run by rich people with a media empire who have their teeth deep in government systems.

These bonds could get worse and worse but if US state and federal governments continue to put thumbs on scales it doesn't matter. The US free market isn't uniformly free.

He's only the "richest" man in the world because of the inflated valuations of his companies. At some point the market looks like a dog chasing its own tail:

Q: Why is this stock so valuable? A: Duh, because Musk is worth a kajillion dollars and everything he touches is gold!

Q: Why is Musk worth a kajillion dollars? A: Because he holds so many shares of extremely valuable companies, silly!

There is this, but he is also a quasi-government figure. As Trump weakens he will reappear in that sphere.

you’re right, the bonds of this overlevered money losing enterprise AI and space cargo conglomerate should be trading at a premium

The bond price is an outcome of lenders judging, not a cause. Lenders have already judged.

Of course. But you have a bond buyer who can put their thumb on the scale, and has shown willingness to do so. That buyer also tried to interfere in (succeeded in interfering in) the business of law firms that worked for anti-Trump causes, has directly interfered in the renewable energy market to benefit its backers, etc.

What is to say that SpaceX and Oracle won't get these benefits? (Government buying bonds, trashing ratings agencies, leaning on banks to lend etc.)

Nothing obvious, I posit. So what is the value of a bond when a government is increasingly likely to manipulate the market for it?

And that is putting aside the second order of government interference: foreign governments putting their thumbs on the scale with their own investment funds and influenceable buyers, to buy influence over a government that favours these firms.

Institutional bond traders are pretty sophisticated. They're aware of all the possibilities you mentioned, and pricing the bonds low anyway.

> Institutional bond traders are pretty sophisticated.

I am old enough to remember Long Term Capital Management.

I'm old enough to remember they weren't just buying and selling corporate bonds like most of the bond market. They were a hedge fund that used massive leverage to exploit tiny arbitrage opportunities between correlated securities.

There may be important factors that the bond market isn't aware of, just like most of them didn't know about the problems with mortgage-backed securities in 2008. But anything you and I are aware of, they probably are too.

> But anything you and I are aware of, they probably are too.

This is something that seems like it should be true but the subprime crisis (which didn't at all come out of the blue — anyone with any instinct at all should have understood when they first saw someone get given insane mortgages) argues against.

A lot of mortgages were trash but the securities were a new and complicated financial product with a plausible story. A few people figured out the problems, but Michael Burry for example did it by combing through thousands of pages of prospectuses.

SpaceX bonds are just plain ol' corporate bonds, the same stuff these investors have been analyzing for a very long time.

Max Keiser of Karmabanque was talking about and writing about it in public more than a year before Burry acted, with pretty solid predictions, without any obvious forensic action. He's quite bonkers, but if it was obvious to Keiser it should have been obvious to these highly intelligent people we're discussing.

Economists predict 500 out of every 10 recessions.

The subprime crisis was a story of perverse financial incentives causing the industry to play along with a fig-leaf statistical excuse for overrating derivative products, not bond raters botching ratings or missing "common-knowledge" info about specific mortgages.

If you want to suggest the subprime crisis as a mechanism for SpaceX bonds getting mispriced, you need to propose a model for how bond evaluators could be operating under a perverse incentive to under-rate it and somehow reap profits from doing so.

> If you want to suggest the subprime crisis as a mechanism for SpaceX bonds getting mispriced

I don't? I'm just observing that the bond market got something wrong — through an absolutely industry-wide blindness - that was indeed observed, years beforehand, by non-experts. Not my example, even. Just responding.

I too can play devil’s advocate

and now back to being an adult

Nobody doubts all this. What the bond market is saying is that even with all of that, there are plenty of viable scenarios where bond holders aren't paid back.

After all, if you truly believe what you say with conviction, the sensible thing to do would be to buy up as many SpaceX bonds as you can if you think they're so undervalued.

They have a $5bn credit line, and this means the creditor might increase the interest on it.

It's better described as "it increases operational risks to SpaceX". When they face some future difficulty, the odds they can come out of it are lowered. Which is itself a factor that partners consider, including employees, because obviously people prefer to bet their livelihoods on more of a sure thing.

This is a potentially strong indicator of how institutional investors view spacex. Given that Spacex is in a high depreciation/capital intensive business, a high cost of capital and potentially difficult capital terms is problematic.

Spacex will raise more money again, they have no known path to structural profitability.

This is effectively an increase in interest rates for SpaceX. That's how it affects them

There is the affect as you say - but more interesting is that it just suggests people who sit around analyzing companies all day think there is a pretty decent chance this thing goes bankrupt.

Companies need to raise money for investment. Even Apple doesn’t have cash for all the things they want to do. Suppose they want to lease or buy a piece of real estate.

Apple has a giant pile of cash and the last time they issued bonds was to do a stock buyback so that might not be the best example, although there's a fairly small number of companies in their unique position.

That’s kind of what I’m saying. Their most recent issuance was 2025. Even when you have a lot of cash it’s inconvenient to spend cash on all purchases

It makes borrowing money much more expensive going forward.

The losses fall on bondholders now, but it does make it harder for SpaceX to raise money going forward. And if they actually slip into junk territory, some institutional investors will be forced to sell (mandates only allow investment-grade), pushing prices down and yields/spreads up even further.

That can snowball: wider spreads → higher borrowing costs → more stress → wider spreads. The existing bonds' coupons are fixed, so the real bite is on future issuance and refinancing.

Lots of capital-intensive companies (SpaceX is definitely in this category) lean heavily on debt markets to fund ongoing investment and roll over maturing debt, so losing cheap access is a big deal.

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