Just how affordable is space travel becoming?

Sascha: [00:00:02] Welcome to The Dive, the podcast that says who said business news needs to be all business. Now, today, there's two big space stories worth talking about. First, the world's leading space company, Space X, they had their financials leaked, and the second is that a fourth country has landed on the moon. So we thought, why not look at both of these stories and do another space themed episode? 

Audio Clip: [00:00:29] We chose to go to the moon. We choose to go to the moon. 

Sascha: [00:00:34] But these two stories are actually connected more than just being out of this world. They both actually show us how much cheaper space travel is becoming. It's Wednesday, the 30th of August. And today I want to know just how affordable is space travel? Getting to talk about this today. I'm joined by my colleague here at Equity Mates. It's Alec Renehan. And Alec, welcome back. After, you know, a little bit of time away, but not too much. It's good to have you back in the hot seat, Sascha. 

Alec: [00:01:03] Good to be back. Didn't quite get to space on my time off, but as we've learnt from these stories, such travel might be closer than we think. 

Sascha: [00:01:12] Yeah, Maybe in the next couple of decades. That's right. Maybe that'll be your retirement trip. Once you've finished working. Finally, you'll get to get on a rocket and get out of here. So let's start at the beginning, and I think a lot of people are familiar with this company. But if you aren't, no shaming here. What is Space X?

Alec: [00:01:35] Yes, Space X, founded by Elon Musk more than two decades ago. It's really become the dominant rocket manufacturer launcher and has also built a major satellite Internet business. It's really the leader of private space launches Nasser. The American Space Agency has become dependent on space X. Nasser doesn't have an American alternative to fly astronauts to and from the International Space Station. So most of the time now, when American astronauts are going to the ISS, it's on a space X rocket. SpaceX is also the leading launcher of satellites into space for a number of private companies. But as a result of this growth and how important it's become to the space economy, space X is now an incredibly valuable company. It was last valued at roughly $150 billion during a recent employee stock sale. For comparison, that's about the same value as Intel or Disney. 

Sascha: [00:02:39] That's a massive but they're privately owned. So like lots of privately owned companies, they keep their details about their finances pretty well under wraps. But the company's financials got leaked during their how. 

Alec: [00:02:52] We don't know how The Wall Street Journal broke the story, didn't say how they got the documents. The Journal then tried to reach out to SpaceX X for comment. Obviously, the company didn't respond. The CFO couldn't be reached. So we don't know how. But we do know a lot about what was in the documents. 

Sascha: [00:03:10] Yeah, if I was the CFO, I'd be unavailable that day as well, I think. What did we learn though? What was in these documents or is there anything interesting? 

Alec: [00:03:19] Yeah, so we got the financials from 2021, 2022 and the first quarter, so the first three months of 2023. And so a few of the sort of key headlines from the numbers that we got. First of all, revenue is growing. In 2021, they brought in $2.3 billion, 2020 to 4.6 billion. So that's double in a year. And then the first quarter of 2023, they bought in $1.5 billion of revenue, which if you annualise that number out, that's a $6 billion runway. [00:03:56][36.9]

Sascha: [00:03:56] Is that just NASA's spending more every year or They do lots of different things, don't they? 

Alec: [00:04:01] Yeah. So it's NASA's spending more, but also a lot of private companies spending more you know these days where you could pay SpaceX to launch something into space. I mean, we would need government approval for it to go into space. But yeah, it's a small thing. Yeah, but yeah, if we wanted to launch a satellite to power our equity mates net, we could do that. So yeah, it's a combination of governments and of private companies. So that's, that's the first thing the revenue line is growing costs are also growing. Not surprisingly, in 2021, SpaceX spent $3.3 billion, and then in 2022, they spent $5.2 billion. That's not surprising. They're launching more rockets. They're growing as a company. They've got a fleet of microsatellites in space that they need to now manage. It's an expensive business. 

Sascha: [00:04:54] So you put revenue together and you put costs together. Some quick back of the envelope maths there, Alec, they're not profitable, are they? 

Alec: [00:05:03] No. So in 2021, SpaceX lost just shy of $1,000,000,000, $968 million. In 2022, their losses reduced. They lost $559 million, so their losses almost halved. But here is the headline and here is the good news story for Space six. Here is why conspiracy theorists may say that Elon Musk himself leaked these financial. 

Sascha: [00:05:29] Conspiracy theories and me just thinking, oh, because they've leaked it. 

Alec: [00:05:34] In the first three months of 2023. So the first quarter of this year, SpaceX X was profitable. They brought in $1.5 million in revenue. They spent less than that and they ended the quarter with a $55 million profit. So good news for SpaceX and its shareholders. 

Sascha: [00:05:54] Yeah, Alec I'm curious, though, is there anything super interesting in the numbers? Because obviously that's the headline that you've given us there Is is there any data that you think tells an interesting story? [00:06:06][11.2]

Alec: [00:06:06] Yeah. So I think the first interesting thing is just how quickly this private space industry is growing, and that is a trend that is going to be worth paying attention to. But if we think about SpaceX as a business, it is really fuelled by Elon Musk's desire to die on Mars and to, you know, make humans a multi-planetary spacey And Space X is taking a lot of this money and they are putting it into research and develop. Last year, they spent $1.3 billion on R&D. Not surprising for a space company. That spend was 11% up from the year before. And a lot of this R&D spending is going to starship. For those unfamiliar, that's that giant rocket that will take astronauts back to the moon. But eventually Allen hopes to Mars onboard view from. If successfully built, it will be able to transport 100 people, up to 100 people on long haul space. SpaceX's tried a launch of Starship earlier this year and it launched, but then it blew up and it was so big that now that in a regulatory dispute with the US government about when they can try another launch. But a lot of the money that SpaceX is spending, any profits they make, it's really going to perfect this giant like this, the world's biggest rocket basically to get people to Mars. 

Sascha: [00:07:42] So, Alec, how are they able to lose so much money? Because it has to come from somewhere. Someone has to be propping it up. I know Elon's just bought x, Twitter X. He's got a lot of debt. It can't just be him. Is putting cash into space X? 

Alec: [00:07:57] Yes. So what we saw from these financials is that every year SpaceX is raising money. In 2021, it raised $1.5 billion from investors. In 2022, it raised around $2 billion from investors. So, you know, a lot of start-ups are struggling to raise money in this market. But a company like SpaceX X with what it's doing and, you know, sort of the cutting edge that its on, investors are willing to keep funding it. 

Sascha: [00:08:25] So Alec, any last interesting thoughts about this SpaceX story?

Alec: [00:08:30] Two more things that came out of their financials that are worth noting. First of all, the documents show that Space X wrote down the value of the Bitcoin that it held by $373 million in 2021 and 2022 and then has since sold all of its Bitcoin. So it lost almost $400 million on its holdings and then eventually just sold out. That's a similar story to Elon Musk's other company, Tesla, which also bought Bitcoin, lost a lot of money on Bitcoin and then eventually sold out of that Bitcoin. 

Sascha: [00:09:04] Interesting. 

Alec: [00:09:07] And then a final notable thing. SpaceX acquired a company called Swarm Technologies, which is notable in SpaceX circles for being the first and perhaps only company to launch satellites into space unauthorised by any government. Space X bought that company. No one knew how much, but the late financials show that they paid $524 million for the company. So yeah. Interesting one if people are interested. Swarm technologies is worth a go because. Yeah. Unauthorised satellite launches. We're in a brave new world here.

Sascha: [00:09:45] Yeah. Also very difficult to get them back. I imagine once they're out there, it's kind of like, well, there it goes. Out into space. 

Alec: [00:09:52] Yeah. The long and the short of the story is that Swarm eventually paid a $900,000 fine to sort of settle the dispute. Mm hmm. But when you think about the cost of launching a satellite, $900,000 seems right in the wheelhouse of just the cost of doing business.

Sascha: [00:10:09] So both of these stories that we're talking about, we introduced because they are helping space travel become more affordable, what does this mean for those of us still firmly planted here on Earth? 

Alec: [00:10:20] Yeah, we keep mentioning that Space X doesn't just service nets, it also services more and more private companies. And the reason that it's been able to grow its revenue so much is because it is just opening up the world of private space launches to more and more private organisations, to more and more companies and and other organisations. So to give you a comparison of how much space X has brought down the cost of launches now. So they retired the space shuttles in 2011, but before they retired them, the cost of a launch was about $1.6 billion or nearly $30,000 per pound of payload, and that's in 20 $21. So, Kate, that number in your head, $30,000 per pound. Russia is sort of the workhorse of the space industry, at least before space things really got going. They cost about $225 million per launch, which works out to be $8,000 per pound of payload. So, you know, NASA's 30,000, Russia, 8000. You can say why Russia quickly became the workhorse of the space industry. Yeah, but SpaceX six have come in and just radically changed what is possible. Their medium lift Falcon nine rocket costs about $62 million per launch, or about $1,200 per pound of payload. So, wow, you know, 30,000, 8000, 1200. You can see how as things get orders of magnitude more affordable. It really just opens up this whole world. And that's why Space X keeps growing. 

Sascha: [00:12:08] 1200 per pound, though. Still, I'm doing the calculations. Puts me out of Yeah, I can't afford to send myself to space. But hey, it's good to say it's definitely way cheaper than 30,000. Look, Alec, let's take a quick break and then when we come back, we talked about Russia being the workhorse of space travel. Well, that is another country is entering the space race and that's India. We'll get to that in just a moment. We're currently only a couple hundred metres above the surface of the moon. We're very, very excitedly watching it count down about 200 metres to go. So this is kind of the area where you hold your breath and hope that everything goes correctly. They are currently repositioning it to make sure that it is going to touchdown exactly straight and it's looking good so far. Welcome back to The Dive. Today. We're talking about all things space. It's one of our favourite topics, but the world Alec as a new space power India, they've become the fourth country only for the fourth country to land on the moon. That actually surprised me researching this.

Alec: [00:13:19] Well, it's funny that you say only four because we learnt a lot about the different types of landings on the moon, because depending on who you ask, more than four countries have. Definitionally there's two ways that you can land on the moon. You can do a soft landing where you touched down deliberately at a safe, slow speed. Then your craft can take scientific measurements or perform tests after landing. That's a soft landing. Or you can do a hard landing, which is essentially a crash landing where you. 

Sascha: [00:13:55] To rebrand.

Alec: [00:13:55] You deliberately know that you're going to destroy the spacecraft. There's going to be no scientific measurements or tests on the lunar surface. The purpose is to crash if we're talking hard landings. Eight countries and one intergovernmental organisation have landed on the moon the USA, Russia, China, India, Japan, the United Arab Emirates, Israel, Luxembourg and then the European Space Agency. So they have all had landed on the lunar surface. 

Sascha: [00:14:26] But Alec, we're talking about soft landings today. We're talking about those that have been meticulously planned. And India has become the fourth country to do so. 

Audio Clip: [00:14:37] But India's space research organisation cheers as it joins an exclusive club, one of only four nations to conquer the moon by spacecraft. India is on the moon. 

Alec: [00:14:50] They join Russia, who first soft landed on the moon in 1966. Well, then it was the USSR. But now Russia, the United States, whose soft landed a couple of months after the USSR, China, who reached that fate in 2013 and now India in 2023, the fourth country to have soft landed on the moon. 

Sascha: [00:15:12] And the notable thing here is that they've done it on a shoestring budget. The cost of space travel is getting far cheaper. Am I going to get a spot on India's next rocket to the moon? Can I afford it? 

Alec: [00:15:26] Well, they didn't take any people to the moon. Let's be very clear. 

Sascha: [00:15:29] Okay? 

Alec: [00:15:30] But it is pretty remarkable just how cheap this scientific mission was. 70 million USD. That is what India spent to get the lunar module to the moon. The comparison that we've seen in a lot of reporting about it, it was cheaper for India to land on the moon than it was for Hollywood to make the space epic interstellar. 

Audio Clip: [00:15:59] We must confront the reality that nothing in our solar system. Can help us. 

Alec: [00:16:08] When you put that in perspective, like it is cheaper to land on the moon for India than it is for Americans to make space time movies. 

Sascha: [00:16:15] It's a pretty impressive comparison, but I'm like, there's a lot of movie stars in Interstellar who would have carried some big paycheques. But I'm getting too stuck in the weeds here. I definitely prefer to watch Interstellar than, I think a full moon landing. 

Alec: [00:16:30] If you take a step back and you look at India's space program in general, their budget is about $2 billion a year. That is just a fraction of the budget for every other country that has landed on the moon. In 2022, America's space budget was $62 billion. China's was $12 billion. The fact that India has been able to do this on a $2 billion budget, but the mission itself had a $70 million budget is again just testament to how much cheaper every part of this mission is becoming from the, you know, the components and the manufacturing to build the module to actually the cost to launch. It is a pretty incredible story and it is a real sign of things to come. 

Sascha: [00:17:21] Well, I guess that's what ties these two stories together. Alec Space X's financials and India's successful mission to the moon both tell that same story. Just how much cheaper space travel is becoming. We're going to leave it there for today. Thank you so much for joining me. Back on the dive after a bit of a break. Great to talk about one of our favourite topics, which is out of this world. A small favour that I could ask from you. Please send this episode to a friend. Please send the dive on to someone who you think would enjoy it. It's 30 seconds of your time. It makes all the world of difference to us. Alec, thanks so much for joining me. 

Alec: [00:17:56] Thanks, Sascha. 

Sascha: [00:17:57] Until next time.