Chanos Questions SpaceX Valuation: $19 Billion in Revenue, Nearly $2 Trillion Valuation—This Is a 'PS Ratio of Dreams'!

Renowned short seller James Chanos slammed SpaceX's upcoming IPO, pointing out that its valuation is severely detached from fundamentals and characterizing this highly anticipated listing as a speculative frenzy driven by "hopes and dreams."

On June 11, according to Bloomberg, Chanos spoke bluntly at the iConnections Global Alts conference in New York:

"We are about to see a $75 billion IPO, corresponding to a valuation nearing $2 trillion, while the company's revenue is only $19 billion and its free cash flow is negative. This is a thoroughgoing 'hopes and dreams' IPO."

He believes that SpaceX's current high valuation reflects investors' enthusiasm for Elon Musk himself and the artificial intelligence narrative more than the company's solid financial performance.

This IPO is regarded as one of the most watched stock listings in recent years. As noted in a previous article by Wallstreetcn, subscription demand for SpaceX soared to $250 billion, representing nearly four times oversubscription. However, Chanos's skepticism strikes at the core of market sentiment: As bull markets assign premiums to promises, are investors paying too high a price for a future that does not yet exist?

Disparate Valuation Multiples, Far Exceeding Tesla

Chanos directly compared SpaceX with Tesla to highlight the extent of its high valuation.

He pointed out that Tesla's market capitalization has remained high for a long time due to future expectations regarding autonomous driving, robotics, and artificial intelligence, with a current PS ratio of approximately 14x. In contrast, the PS ratio implied by SpaceX's IPO is around 90x, 'completely another order of magnitude.'

This comparison reveals that the premium the market assigns to SpaceX far exceeds the pricing logic applied to Tesla. Chanos believes that SpaceX's high valuation relies heavily on a series of future businesses that are still in the theoretical stage, including space data centers, lunar manufacturing, and other projects tied to Musk's long-term vision.

"The potential market size for space is infinite," he said. "You can construct any story—Mars colonies, lunar factories, space data centers—to endorse this valuation."

Despite his sharp remarks, Chanos did not announce an immediate plan to short SpaceX stock, but he expressed clear skepticism about the IPO pricing.

He stated that existing core businesses, represented by the Starlink satellite internet service, might support a valuation in the "hundreds of billions."

"The question is whether the remaining $1.5 trillion is worth it," he said. This implies that, in his framework, the vast majority of SpaceX's current valuation is built on future expectations that have yet to be realized.

Space Data Centers: Technically Feasible, Economically Challenging

Addressing the recently popular concept of space data centers, Chanos offered a clear rebuttal. He acknowledged that such projects are technically feasible but emphasized that they face significant economic and operational hurdles, including launch costs, maintenance challenges, insurance requirements, and the need for extensive redundant facilities.

"Equipment in data centers fails all the time," he said. "If this happens in space, you can't send a technician up with spare parts to fix it."

He also pointed out that SpaceX's Starship rocket is crucial for reducing launch costs and achieving many of the company's future goals, but it has not yet demonstrated sustained success in reaching orbit.

Chanos placed SpaceX's IPO in a broader market context. He believes that this listing is a typical embodiment of the current market's willingness to bet on distant possibilities while ignoring present economic realities.

"Bull markets assign premiums to promises, bear markets discount reality, and right now, we are clearly in the former."