Global transportation has really come into the spotlight recently as large cities continue to grow, population density intensifies, and advancements in technology look to disrupt the existing state of affairs. One of the most exciting new companies in the space is another one of Elon Musk’s brainchildren – The Boring Company.
Sarcastically named, The Boring Company is a construction and infrastructure company that is aiming to solve the traffic problem by boring large transportation tunnels underground. It’s a staggering proposition, and one that has drawn both awe and confusion alike – but what cannot be denied is that the concept is fascinating. By creating underground tunnels for transportation, the company hopes to alleviate the pressures on urban road systems and create alternative means of getting around densely populated areas.
Investors who think that this is a viable alternative to traditional ground transportation have been clamouring for the opportunity to get involved, and so the natural question for everyone is whether The Boring Company will IPO?
The Case for a Boring Company IPO
The strongest argument in favour of the company coming to the public markets is the sheer scale of resources that are needed to get these tunnels built. These are mammoth projects taking place in already congested urban areas and just to prove the concept, the company must spend a lot of money to terraform the earth and build something robust and sustainable. As a result, it might make sense for the company to turn to public markets, where they can raise substantially more than what might be possible in private deals.
So far, the company has raised a reported $908m in private funding since its inception, but it’s going to require many more billions of dollars to get things to a point where this is considered a mainstream form of transport. The public markets might be a better way to source that capital. This is especially the case as we enter a much-awaited bear market where many VCs who had been overplaying their hand will get caught out.
The other reason why Musk might consider an IPO is that this sort of project is adjacent to a public good that has a huge group of affected stakeholders. To work with governments, transport departments, regulators, and others – it might make sense to be operating through a public company, rather than something more opaque. An IPO might be seen as a show of good faith to demonstrate their willingness to work with the various stakeholders and to arrive at a solution that works for everyone.
The Case Against a Boring Company IPO
As yet, we haven’t heard any interest from Musk or the company about an intention to IPO and until that changes, we’re unlikely to see any movement on this front. The company is not yet profitable and for all intents and purposes – remains a company in the research and development stage of the company’s life cycle. We’d likely need to see some working prototypes that are tested in real-life situations before we were to imagine seeing the company come to the public markets. The first of which will be the proposed Las Vegas loop which has halted due to COVID-19 but now seems to be getting back on track.
Another reason why The Boring Company might not IPO is if they decide to merge with another one of Musk’s companies instead. There has been talk recently about potentially combining his various companies (Tesla, SpaceX, Neuralink, Solar City, The Boring Company) into a larger conglomerate that might take advantage of specific synergies and other economies of scale. If this were to happen, we simply wouldn’t see an individual IPO for The Boring Company itself.
Lastly, it’s worth noting that the actual concept itself hasn’t yet been proven. While it is intriguing, we won’t know whether the company can stand up to all the hype until we see a working product in the real world. It looks like either Las Vegas or Austin will have that first working version and the success of that will have a big impact on the overall investor sentiment. Until then, it’s probably premature to look towards an IPO – though, with that being said, we’ve seen crazier things happen.
What Do We Think?
It really is impossible to know whether a Boring Company IPO is on the cards for any time soon. We don’t think it’s likely in the next 1-3 years, but subsequently, it might just become something worth paying attention to. If we’ve learned anything in the last decade, it's to not underestimate what Elon Musk can achieve and the talent he can wrangle. If the company receives more of his attention and demonstrates its value in a real city environment, this might just become the hottest IPO on the market.
All we can say for now is, ‘watch this space’.
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