Veteran short seller James Chanos said SpaceX’s blockbuster public debut is being driven more by investor enthusiasm for Elon Musk and artificial intelligence than by financial fundamentals, arguing the company’s valuation is difficult to justify on any reasonable business assumptions.
Speaking ahead of the company’s highly anticipated initial public offering, Chanos, founder of Chanos & Co., described the deal as a key test of market sentiment as investors pour money into speculative growth stories.
“We’re going to be doing a $75 billion IPO for a valuation of close to $2 trillion for a company with revenues of $19 billion and negative free cash flow,” Chanos said at the iConnections Global Alts conference in New York that gathered more than 2,500 institutional allocators and fund managers. “This is really a hopes-and-dreams IPO.”
The offering has become one of the most closely watched equity debuts in history, with demand reportedly several times higher than the available shares. But Chanos said the valuation reflects expectations for future businesses that remain largely theoretical, including space-based data centers, lunar manufacturing and other ventures tied to Musk’s long-term vision.
“The total addressable market for space is infinite,” he said. “You can build whatever stories you want — colonies on Mars, factories on the moon, data centers in space — to justify the valuation.”
Chanos compared SpaceX’s premium to the one investors assign to Tesla Inc., which has a market value that has long been buoyed by expectations around autonomous driving, robotics and artificial intelligence. Yet he argued SpaceX is being valued at a far steeper multiple.
“Tesla trades at roughly 14 times revenue based on promises of the future,” he said. “SpaceX is coming at roughly 90 times revenues, which is a completely different animal.”
While Chanos stopped short of saying he would immediately short the stock, he indicated skepticism toward the IPO price. Existing businesses, including Starlink’s satellite internet operations, could support a valuation of “a couple hundred billion dollars,” he said. “The question is whether the rest is worth $1.5 trillion.”
Chanos also dismissed claims that space-based data centers could become a transformative new market. While technically feasible, he said such projects face significant economic and operational hurdles, including launch costs, maintenance challenges, insurance requirements and the need for extensive redundancy.
“Stuff breaks all the time in data centers,” he said, adding that if it happens in space, you can’t just send up a technician with replacement parts.
He added that SpaceX’s Starship rocket — critical to lowering launch costs and enabling many of the company’s future ambitions — has yet to demonstrate sustained orbital success.
More broadly, Chanos argued that the SpaceX offering exemplifies a market increasingly willing to bet on distant possibilities while overlooking present-day economics.
“Bull markets put a premium on promises,” he said. “Bear markets put a discount on reality. Right now we’re clearly in the former.”
Written by: Natalia Kniazhevich @Bloomberg
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