SpaceX raised $25 billion through a senior unsecured notes offering on June 22, less than two weeks after its initial public offering on June 12. The company stated it would use net proceeds to repay outstanding borrowings under its bridge loan facility in full, to pay related fees and expenses, and any remaining amount for general corporate purposes. The bond issuance, which received nearly $90 billion worth of orders according to people familiar with the fundraising, has raised diversification questions among investors now exposed to SpaceX through both equity and debt instruments.
SpaceX Prices $25 Billion Bond Offering Across Five Tranches
SpaceX announced the senior unsecured notes offering on June 22, with sources telling CNBC that the company initially sought to raise $20 billion before increasing the amount to $25 billion. The company priced bonds in five different tranches, with notes due between 2031 and 2056. Rates vary from 5.35% for the 2031 bonds to 6.65% for the 2056 notes. The 10-year issue is trading at a spread to the equivalent U.S. Treasury of 1.4 percentage points.
Bond Offering Receives $90 Billion in Investor Orders
SpaceX received nearly $90 billion worth of orders, people familiar with the fundraising told CNBC. They asked not to be named because the details are private. However, SpaceX stock fell more than 13% for the week after the bond announcement, following a strong post-IPO run. Chris Beauchamp, chief market analyst at IG, said equity investors are one thing, but "bond guys are the grown-ups in the room."
Analysts Highlight Execution Risk Across Equity and Debt Instruments
Christopher Della Fave, senior vice president, capital markets at Post Oak Group, stated: "Two weeks after the largest IPO in history, SpaceX is already tapping debt markets while carrying a $5 billion net loss and capex that more than doubled year over year." Della Fave noted that "owning SPCX equity and SpaceX bonds isn't diversification. It's the same execution risk across two instruments." Julian Howard, multi-asset head at Gam, pointed out that nearly all investors already hold allocations to US technology and "the purpose of bonds as an asset class is surely to diversify."
FAQ
What amount did SpaceX raise in its bond offering on June 22?
SpaceX raised $25 billion through a senior unsecured notes offering. Sources told CNBC the company initially sought to raise $20 billion before increasing the amount to $25 billion.
How will SpaceX use the proceeds from the bond offering?
The company stated it would use the net proceeds to repay the outstanding borrowings under its bridge loan facility in full, to pay related fees and expenses, and any remaining amount for general corporate purposes.
Why are analysts concerned about diversification for SpaceX investors?
Analysts note that investors holding both SpaceX equity and bonds face "the same execution risk across two instruments" rather than true diversification, as both depend on the company's operational success.
