According to CNBC, Elon Musk's space company Space X is expected to increase its enterprise value to a new record level very soon. After the next round of financing, this is estimated to be around USD 127 billion.
Space X has been one of the best-known companies for many years, and more and more investors have been putting their money into it recently. What does the higher Space X valuation mean for all those who already hold shares in Space X or who decide to buy Space X shares on the stock exchange?
Space X launches a new round of financing
Space X has announced it will soon raise additional funds with the help of a new and substantial funding round. This would bring the Space X value to $127 billion, according to CNBC. In October last year, Space X valuation was at USD 100 billion, according to GOBankingRates.
Up to about $1.7 billion in additional capital is what Elon Musk's space company is looking to raise this way. With its new round of funding, aerospace company Space X could soon become the most valuable startup operating in the United States.
According to an email obtained by CNBC, the price of a Space X share is expected to rise to USD 70 in the process. This will make a Space X share about 25% more expensive than before.
The sense of a financing round
The reason Space X is launching another round of financing is, of course, to raise capital. In this example, capital investors invest in Space X - the company can then use this money to expand further.
Depending on how much capital is needed, a company can resort to different types of financing rounds.
Valuation of Space X continues to rise
In the last few years alone, Space X's valuation has already skyrocketed. Especially because the Elon Musk-led company also has two capital-intensive subsidiaries. These are the Starlink satellite network and the Starship rocket program.
Space X is conducting a secondary sale of its shares
Another of Space X's plans is to seek a secondary sale of its common stock. In total, these are to have a value of a maximum of USD 750 million. The sale is to be made primarily to existing shareholders.
However, this is not the first time that Space X has taken this step. The management has already done so regularly in the past.
One of Space X's goals in doing so is to also land new shareholders. Or to give long-time shareholders the opportunity to sell their shares at a profit.
One Space X share was worth more before February
Anyone who has regularly observed the course of Space X share price in the past will notice that its value was significantly higher at the beginning of this year. Up until February, one Space X share cost $560.
However, there is an explanation for this. Back in February, Space X's management decided to do a stock split. The ratio at that time was 1:10. From an earlier CNBC report, this caused Space X's share price to drop from 560 USD to 56 USD.
The lower price does not mean a loss of value for the company
Of course, such a stock split can be confusing, especially for investors who are new to investing. Especially for outsiders, such a stock split gives the impression that the value of Space X stock has dropped by 90% in this case. Inexperienced investors then tend to sell their shares quickly, although they do not have to do so at all.
However, investors need not worry about this. Because in a stock split, the value of a share does not decrease, but is split into several parts. In Space X's case, this meant that everyone who had one share now owns 10 shares.
This is another of Space X's ways of adding new shareholders to its own ranks. After all, the inhibition threshold for buying a share with a value of 56 USD is naturally lower than for one that costs 560 USD.
Of course, there is also the opposite – in this case, various shares of a company are combined. In this case, we talk about a reverse stock split.
Space X not on the stock exchange
However, Space X shares are not available for purchase on the stock market by private investors. Sure, Space X is a public company, but the shares are sold to other companies. However, the stock split in particular could be an indication that Space X may be planning to attract private investors as well.