Elon Musk is steamrolling Wall Street to become a trillionaire

My guest today is Ryan Mac, a technology reporter at The New York Times and co-author of the excellent book Character Limit: How Elon Musk Destroyed Twitter, which came out in 2024. I wanted to have Ryan on today because we’re on the cusp of the SpaceX IPO, which promises to be one of the most consequential public offerings in history for a variety of reasons. Its biggest-ever size, of course, at nearly $2 trillion dollars. But also because all kinds of rules that keep our markets fair are being bent, if not outright broken, along the way. And, also because buried somewhere inside SpaceX is X, the social platform formerly known as Twitter, which Musk purchased in 2022. Read the full interview transcript on The Verge. Links: Welcome to hell, Elon | The Verge The SpaceX IPO is great for Elon Musk and terrible for you | The Verge In SpaceX’s IPO, Elon Musk is the risk factor | The Verge For Wall Street, the only thing worse than SpaceX flopping is missing out | NYT How SpaceX Is structured to favor Elon Musk | NYT As the SpaceX hype machine steamrolls ahead, Wall Street jumps aboard | NYT The SpaceX IPO Reveals What Really Happened to Twitter | NY Mag Subscribe to The Verge to access the ad-free version of Decoder! Credits: Decoder is a production of The Verge and part of the Vox Media Podcast Network. Decoder is produced by Kate Cox and Nick Statt and edited by Ursa Wright. Our editorial director is Kevin McShane. The Decoder music is by Breakmaster Cylinder. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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  Hello and welcome to Decoder. I'm Neil I. Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. My guest today is Ryan Mack, technology reporter at The New York Times and co-author of the excellent book Character Limit: How Elon Musk Destroyed Twitter. The book came out in 2024. I could not recommend it more. I wanted to have Ryan on today because we're on the cusp of the SpaceX IPO, which promises to be one of the most consequential public offerings in history for a variety of reasons. Its biggest-ever size, of course, at nearly $2 trillion, but also because all kinds of rules that keep our markets fair are being bent, if not outright broken, along the way. And also, because somewhere buried deep inside SpaceX is X, the social platform formerly known as Twitter, which Musk purchased in 2022.

• 2:14Speaker 04

  That's what Ryan co-wrote that book about. Now, you might recall that I personally was very confident that Elon Musk would come to regret buying Twitter. On the day of the sale, I wrote a piece called "Welcome to Hell, Elon," which was probably the single most-read thing I've ever written. My thesis was that there would be no way to grow Twitter users and revenue without moderating the platform well, and that ultimately Elon buying Twitter would destroy his reputation and cause damage to his other companies. Well, now we have the numbers from the SpaceX IPO filing to see how right my prediction was. As you'll hear us discuss, X is shrinking by every major metric, but you're also going to hear Ryan point out that it might not matter. I'm curious, take a listen to this conversation and let me know what you think. Was I right or was I wrong?

• 2:58Speaker 04

  Brian and I also got into all those rules that are being broken to land the SpaceX IPO. Rules about shareholder control, inclusion onto the major index funds, and all the other levers of market accountability that usually serve to keep companies in check. You're going to hear, say, corporate governance a lot in this episode, and while it might sound boring, it won't be if you simply take a shot every time it comes up. Okay, don't do that. But do consider what it means that Elon Musk has become so rich, so powerful, and so detached from the levers of accountability that he can apparently get away with anything he wants without any major banks, fund managers, or investors calling foul because they don't want to miss out on what could be the biggest financial windfall in recent memory. There's a lot to think about in this episode.

• 3:42Speaker 04

  Okay, New York Times tech reporter Ryan Mack on Elon Musk X and the SpaceX IPO. Here we go.

• 4:00Speaker 04

  Ryan Mack, you're a technology reporter at the New York Times. Welcome to Decoder.

• 4:04Speaker 05

  Thanks for having me.

• 4:05Speaker 04

  I am really excited to talk to you. I can't believe you've never been on the show before. I feel like we've done a lot of reporting sort of in and around each other. I'm a big fan. Thanks so much for being on.

• 4:12Speaker 05

  I know, what the hell, man? You just avoided me this whole time. But no, I'm kidding. It's good to be, it's good to be here, listen to many episodes, so great to be a part of it.

• 4:21Speaker 04

  Well, now we're going to ask you to answer for your crimes, which is what, which is what the Decoder audience really wants me to do with every guest. No, speaking of crimes, we're going to talk about the SpaceX IPO. Elon Musk has obviously filed to take SpaceX public. There's a lot in that IPO, including the idea that there's like a $28 trillion addressable market for SpaceX services, which is more than the world. You know, just a lot, just a lot in there. And you've reported on a lot of it, so I do want to dive into it. I actually want to start with X, the everything app, the app formerly known as Twitter, because the SpaceX S1.

• 4:56Speaker 04

  Really gives us our first look into what that business is, what it has become, where it's growing. In 2022, I wrote an article, maybe the most viral article I've ever written. It was called Welcome to Hell, Elon, in which I very confidently predicted that buying Twitter would be a disaster for Elon Musk. And I'm just going to read you my thesis. It was like the first sentence of the piece. And then I want to try to back into what we know about X. And I'm very curious if you think this has come true or not. So my thesis was Twitter is a disaster clown car company that is successful despite itself. And there's no possible way to grow users and revenue without making a series of enormous compromises that will ultimately destroy Elon Musk's reputation and possibly cause grievous damage to his other companies. I think there's one view to say, yep, that totally came true. I think there's another view to say, actually, Elon is more powerful than ever. And on the cusp of an IPO, that's going

• 5:41Speaker 04

  to make him a trillionaire. So tell me about X. What do we know about X, the company, in the years since Elon has bought it? And what do we know about its financials as reported in this S1?

• 5:51Speaker 05

  Sure. I think you mentioned the word growing and all that. And I think the place to start is the fact that X is simply not growing. You know, it's stagnated in terms of revenue, stagnated in terms of user growth. You know, it's been buried twice within Elon's companies, first into XAI, and now into SpaceX. So it's kind of become, in some ways, an afterthought in the Musk empire, despite it, you know, still being arguably Musk's favorite thing. You know, he spends countless hours a day on that thing, like many of us used to, many of us still do. But in terms of a business proposition, it's kind of a non-factor if you compare it to

• 6:35Speaker 05

  some of the other aspects of this business, you know, something like Starlink, for example.

• 6:41Speaker 05

  And if you look back at 2022, it's kind of just bizarre, right? He bought this company on a whim.

• 6:51Speaker 05

  He pitched this idea to investors that he would have a billion users. He would have payments integrated to it. It would be somewhere you could potentially book a taxi. You know, he pitched this idea of it being WeChat. You know, you mentioned the everything app, right? And it's certainly not the everything app. At one point, he was like, you could watch TV on it and all, you know, and none of that has come to fruition. Yet I look at what's happened in the last four, five years since then, four years. And he's gone, he's gotten more powerful than ever. You know, he is, his net worth has increased. I think around the time he bought the company, it was around $300 billion in net worth. His, his net worth fluctuates anywhere from 600, 800 billion dollars these days.

• 7:33Speaker 05

  And a SpaceX IPO will take him potentially beyond the trillion dollar mark for the first time ever in human history. It's bizarre in that like, there's a lot of contradictory things about it, but at the end of the day, I'd argue he still comes out on top.

• 7:47Speaker 04

  Is it just as simple as he bought a distribution platform for his own tweets? And he controlled it and he fixed the algorithm to favor himself. And that worked and it doesn't matter that revenue is down $100 million year over year. And it's only not even like quite 40% of Twitter's pre-acquisition revenue. Like he's destroyed the business by every metric we can see in the S1. Every number is down and only the revenue from data licensing to AI companies is up.

• 8:16Speaker 05

  His own AI company too. And that, that like, yes, if you singularly look at X as a business, it's

• 8:25Speaker 05

  clearly a failure from, from, from the time he took over the company to, you know, fidelity marketing, marking the valuation of the company down to $10 billion before he merged it with XAI. You have to look at it in the, the whole landscape of Musk Inc., I guess. And since he bought the company, he spun up XAI, raised billions of dollars for that company. He then merged it into XAI, kind of burying it. And then he merged it again in this XAI into SpaceX. And so I guess he's up. And if you're doing like a plus minus kind of analysis of valuations of these companies. And again, these are valuations that seemingly have no basis in business fundamentals. You know, this, we're playing with Musk math here.

• 9:07Speaker 05

  And, you know, he has this whole cadre of investors and friends that are willing to back him to the end of the earth. But.

• 9:16Speaker 05

  Yeah, he is, I'd say, winning.

• 9:18Speaker 04

  There's a version of this where you could straightforwardly make the argument that however many billions he lost on Twitter is worth it, is an investment that got him to, we're going to do a trillion dollar SpaceX IPO.

• 9:30Speaker 05

  I caution against kind of looking back at it historically and thinking that was his plan all along. You know, I think there is this trope that kind of came up after Trump won the election that, you know, Elon Musk bought X to then help elect Donald Trump. And I guess, like, you know, there was really no proof of that, especially when we did our reporting at The Times and for our book, Character Limit. But, you know, it has worked out for him. I think it's, it's kind of undisputable in that sense. And yeah, he has bought a distribution platform for his own tweets. You know, he's the most followed person on the platform now. You know, he controls the algorithm, he controls, you know, the content,

• 10:15Speaker 05

  other content that gets boosted on the platform. So, yeah, again, I don't know how to say this more, but he's winning. And that's just where we are right now in, I guess, society.

• 10:30Speaker 04

  In the pre-X days, when it was still Twitter, Elon would constantly talk about how he didn't do any marketing for Tesla. He had spent no money in advertising, he spent no money in marketing. He would just tweet sort of Tesla sales up and down. And there was kind of infinite demand for the Tesla Model 3, in particular, and the Model Y. So much so that every other carmaker essentially got confused and made Tesla Model Y's of their own. And they just thought people wanted electric cars. Maybe they just wanted Teslas, and maybe there was a mean stock component to it. But Elon was just very good at using Twitter to drive demand for his products. And he would constantly say, we honestly pay for marketing, I just have this platform. The other part of my thesis was that buying X and changing the algorithm and being as political as he has been would

• 11:11Speaker 04

  cause reputational damage to Elon. It would cause reputational damage to his companies. I think there's some evidence that that is true in the case of Tesla, where the cars are less popular than they once were. Certainly, there are campaigns to protest it, Tesla dealerships. Is that true for SpaceX? Is it true for the rest of his empire?

• 11:28Speaker 05

  That is a great question. And with Tesla, of course, after the election, you saw the, you know, the Tesla takedown protests, people, you know, slapping those bumper stickers on their cars. You know, I bought this before Elon went crazy. And you could see Tesla... The share of the Tesla market in the EV market kind of falling, of course, there's a lot to do with the rise of Chinese vehicle manufacturers like BYD.

• 11:52Speaker 05

  But I don't know, I don't think I see the same kind of reputational harm to SpaceX that I've seen with Tesla. And that may be because there's just not as much consumer contact with parts of SpaceX. I mean, I think of something like the launch business, you know, I'm not going on buying a launch, you know, regular people aren't buying launches. They're contracting with governments and big companies. And not to mention that they largely have a monopoly on getting things into space. And so if your option is working with a company that has a CEO that, you know, is reputationally compromised versus not getting into space at all, you'll probably go with the former.

• 12:35Speaker 05

  Starlink is another, I guess is another basket. You know, I think it offers a product that is quite good and is not challenged in any way. You know, I think of something like Iridium, for example, or, you know, the companies it competes against and it just blows them out of the water in a way. You know, it's such a strong service.

• 12:59Speaker 05

  So much so that, you know, governments rely on it and Ukraine relies on it. And the numbers there continue to grow. I think that's kind of the crown jewel of the SpaceX business empire right now, you know, in terms of revenue and profit.

• 13:13Speaker 04

  Yeah, there's no moral case to be made for being on HughesNet still. You can't, you can't be a better person by being on some of the other satellite providers that service the rural parts of the country. We see it in our own traffic and our own comments. We cover Starlink. There's nothing better. They continue to innovate in the ways they continue to innovate. And the audience doesn't like it, but then there's a huge part of the audience that says, wait, I don't have a market alternative to this. You're kind of saying where there isn't a market alternative, the reputational issues have not been a problem. And every place where there might be, or there's a consumer market, the reputational issues have damaged him. I think X is actually the example of this, right? There are a number of market alternatives to X. And so people have just left the platform.

• 13:55Speaker 04

  Whether or not there's one big competitor to X, I think remains to be seen. Threads by some accounts is vastly bigger than X, but it does not have the influence. Blue skies run by very charming. Ideological people, they're doing whatever it is they're doing. It's certainly not a competitor head up to X. Is there a reason that influence hasn't recapitulated itself anywhere? Or that the people still on X have stayed there?

• 14:19Speaker 05

  Ah, man, it's something I think about a lot. And I think, I think the rumors of X's demise at the time were greatly exaggerated in a way. I just think these social platforms are so sticky. And I remember, remember one of the, the rounds of layoffs, right? Everyone thought, I think it was like the, the fork in the road or, or one of those early rounds. And Twitter went down for a period of time too. And I remember being at dinner and everyone just being, just writing eulogies for, for Twitter that night. And I'm like, guys, I don't, I don't think this is it. Like, this is a pretty resilient platform. It's been developed over, you know, more than a decade. It's, it's been around for a while. It's quite a resilient thing and it has a dedicated user base. That's why we love it, you know?

• 15:03Speaker 05

  It's, it's kind of a, you know, great social experiment. And so those, at the time, you know, I was, I was wary to be like, you know, this is the end of Twitter. And I think you, you're starting to see that now, how resilient it is, you know? I think we're so caught up in it as reporters, like, you know, um, and we're on it all the time. But there are normal people out there that go to Twitter still or go to X still because their soccer community is on it or, um, you know, it's where they talk about movies and they have their six best friends on there. And, you know, it's still a very sticky platform. And in spite of the, you know, CSAM from Grok or the, you know, abusive stuff from Elon

• 15:45Speaker 05

  or the hate speech, like, they persist because it's just where they've learned to be. And yeah, it's, it's hard to generate that from scratch. And I think that's why you're seeing things like Blue Sky hit, um, kind of a ceiling here in terms of attracting a wider audience.

• 16:03Speaker 04

  Do you think as we go into the IPO and the SpaceX becomes a public company and X is just sort of one piece of the puzzle, that it increases or decreases in importance to Elon? It is his favorite thing.

• 16:15Speaker 05

  Yeah.

• 16:15Speaker 04

  But running a public rocket company is just a very different set of priorities.

• 16:19Speaker 05

  Maybe, but also like, he never operates as we expect him to, right? Like,

• 16:27Speaker 05

  Man, running Tesla and having a Twitter account has not worked out well for him in the past. You know, he's been sued for some of the stuff he's put on X, I think of, or sorry, on Twitter, I think of 2018, when he got sued for saying, "Funding secured for taking Tesla private." You know, and he got away, you know, paid $20 million in a fine and largely got away with it. He's way more powerful now, way richer than ever. So I don't think, you know, SpaceX being a company, being a public company will necessarily change his habits on X these days. I mean, the other day, I saw him posting about the Anthropic deal. I don't know if you saw that, that was in the S1. And he was pushing back on the idea that Anthropic would pay this amount of money for a certain amount of years,

• 17:12Speaker 05

  you know, this large amount of revenue, $1.25 billion a year. And he was openly contradicting what was in the company's IPO documents, which you cannot do during a quiet period. And, you know, I don't think anything's going to come of that. He's, I don't think he'll get a slap on the wrist or anything. He's just kind of higher than any form of accountability right now.

• 17:36Speaker 04

  We're going to pause here for a quick break. We'll be right back.

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• 19:22Speaker 04

  We're back with New York Times tech reporter Ryan Mac discussing the path from Elon Musk buying the platform formerly known as Twitter to taking SpaceX public. I think that brings us to the larger SpaceX IPO in general, because the whole thing is structured to avoid the mechanisms of accountability that usually exist in our markets, right? It's going to end up on the NASDAQ in some way, shape or form in a way that basically all of us are going to end up invested in SpaceX. And we can't take our dollars away because it'll be the index fund. Elon is going to control an enormous part of the company in a way that maybe he just can never be removed. And who knows? Who knows if even having a board of directors is important in that sort of case? And then, you know, he has a monopoly in rocket launches, at least for now. And who knows if there

• 20:07Speaker 04

  will be market alternatives that provide accountability to SpaceX? Walk us through how this is structured. You've written about it at length, that the SpaceX IPO is a corporate governance disaster, if you care about corporate governance. Walk us through it.

• 20:21Speaker 05

  I'm a big corporate governance guy myself.

• 20:23Speaker 04

  It is the hottest, it's what all the TikTok dances are about lately.

• 20:26Speaker 05

  Yeah, I have a corporate governance tattoo on my lower back. But this is like serious stuff, and it's concerning to people that study corporate governance. So let's talk about Elon Musk's ownership of the company, or his voting control of the company. He has super voting shares that, all told, give him about 85% control of votes at the company. And that's, you know, a super, super majority at this point. He basically controls every corporate decision at the share voting level. And, you know, I think of something like Meta, for example, and compare that to Mark Zuckerberg. I think with super voting and voting agreements, Zuckerberg controls about 60%. So Elon has even a...

• 21:09Speaker 05

  Larger stranglehold on his company than that. So what does that mean? It means he controls the board. He appoints friends and advisors to board seats. He, you know, there's no independent board commission to structure pay packages. So essentially he has control over how he gets compensated. I read about this pay package that he got earlier this year where he was awarded 1.3 billion shares in what's called restricted stock. And if you actually look at the footnotes there in that S1, you can see that he's already able to vote that stock, which is kind of insane. And it's kind of unheard of.

• 21:50Speaker 05

  You know, he hasn't earned any of these shares and these shares are pegged to hitting milestones of the company, creating a colony on Mars with a million people and putting data centers in space with, I think, 100 terawatts of compute a year. Just, you know, an astronomical figure. And he has to hit these things in order to gain these shares to sell them. Well, he hasn't hit any of these milestones and he's able to vote these already, given the stipulations that were put on them.

• 22:20Speaker 04

  Can I, can I ask you about this? The, the colony on Mars with a million people, however many, I mean, this is all bananas, right?

• 22:27Speaker 05

  I guess we're burning the lead here, yeah.

• 22:28Speaker 04

  Right, like he, he gets a huge pay package if he puts a colony on Mars with a million people in it. And he puts however many terawatts of compute in space.

• 22:36Speaker 05

  Right.

• 22:36Speaker 04

  He's in charge of this S1. Like he obviously wrote it to his own specifications. Why set milestones that are unachievable and then vote the stock anyway? Instead of just giving yourself the stock?

• 22:49Speaker 05

  Good question. I think, I don't know, maybe it gives it some semblance of like he has to work towards these goals. But if you talk to corporate governance folks, they're sort of appalled that he gets to vote these anyways. You know, this adds to his, his voting control, that 85% we talked about earlier. On top of that, he gets to take out loans against these shares. And of that, of course, that comes with board approval, but he controls the board. So he's able to take out loans against these shares and, and get cash. Um, and I, yeah, I don't know. I don't know why even play this kind of dance of I have to hit these milestones, but.

• 23:29Speaker 04

  My theory is that so he can tweet about them, right? Like legitimately, my theory is that he wants to be able to say, I don't get paid unless I put a million people on Mars, regardless of the technical details of whether he can vote the shares or take out loans against them as collateral.

• 23:43Speaker 05

  Sure.

• 23:44Speaker 04

  He gets to represent to the world. I don't, I don't receive the windfall until there's a million people on Mars.

• 23:50Speaker 05

  Great point. There's also a fun little wrinkle here in that you don't pay taxes on them until you earn them. And so because he hasn't earned them, because he doesn't technically hold them yet, or doesn't have the ability to sell them, it's not taxable. And so he doesn't have to pay taxes on that either, uh, until he hits his milestones. So in some ways, if you believe he'll never hit them, he can still derive the power and potentially financial gain from it simply by, you know, holding them, I guess, or, you know, having this pay package under his thumb.

• 24:22Speaker 04

  The usual way that a market could correct this is by a bunch of people telling retail investors, don't invest in this IPO, or a bunch of people who are angry at Elon Musk, selling their Teslas and telling their friends not to buy this IPO and driving their stock price down. And that is a market corrective. And we can see this happen with a variety of companies over time. This IPO is going to end up in index funds, like very quickly in a way that I think is also terrifying a bunch of corporate governance experts, the sexiest new characters in American politics. Um, talk about that. How are we going to mechanically all end up owning SpaceX whether we want to or not?

• 24:57Speaker 05

  This, I think, is like the most underplayed and sort of insane thing to think about. So how does this work? Um, you know, maybe you and I take a look at the SpaceX IPO and we're like, I don't like those financials. I personally would not invest in that company. I'm not going to buy shares through my Robinhood account or Schwab account, whatever. But let's say we also have investments in index funds. Uh, you know, we all have retirement accounts. Sometimes they're invested in index funds. So we're just kind of passive investors in, in stock and these index funds trace the American industry by buying up shares in, in various stocks. Um, so what's happening here is that SpaceX and these indices, indices have worked together. To relax some of the rules.

• 25:42Speaker 05

  And so let's take the NASDAQ 100, for example. The NASDAQ 100 has 100 stocks in it that trace, again, American industry, like kind of blue chip stocks. Typically, it takes about 90 days for a company after its IPO to enter the NASDAQ 100 or to be allowed into the NASDAQ 100. The reason for that is it allows for some type of cooling period. Typically, after IPOs, stocks go up and down. It takes some time to settle on the public market and to have, you know, a steady kind of valuation. And that's normal. In this case, SpaceX gets to enter the index after 15 days. You know, so kind of in the midst of this very big hype cycle. And so that's essentially going to force a lot of these index funds

• 26:25Speaker 05

  to buy up SpaceX shares because it has entered the, you know, index. That will give SpaceX access to a lot of capital it would have had to have waited for for a couple of months. You know, and that's going to continue to buy, you know, drive the buying frenzy in the stock. And so it's sort of genius in a way, I guess, from SpaceX's perspective, to get to get that access to, you know, this billions and billions of dollars of capital in some of these index funds. And that's just kind of one way the rules have been relaxed for this, for this IPO.

• 26:57Speaker 04

  How did that occur? Did Elon just roll up to all the index fund owners and say, pretty please? Did he buy them off? Was it above board? Was it corrupt?

• 27:04Speaker 05

  It's been pretty opaque, but you know, these, these things were simply announced. You know, there's been rules around profitability that have been relaxed as well at some of these indices. There's been rules around governance that have been relaxed as well. And what I'm seeing here, what I've talked to folks about is just this, this level of hype has generated so much FOMO around, you know, the stock, this fear of missing out. And so you get to the point where these rules are being thrown. I talked to one corporate governance expert who said, you know, it'd be like having all the rules and setting aside all the rules for football. And, you know, you play with the rules of football and you've perfected it and you have it down to the rules of the game.

• 27:48Speaker 05

  And then when you get to the Super Bowl, the biggest event of the year, you change those rules. And that's kind of what we're seeing here with SpaceX.

• 27:56Speaker 04

  There's a lot of people who root against the Kansas City Chiefs who understand exactly what you're talking about in very specific ways.

• 28:01Speaker 05

  It'd be like, it'd be like taking the tush push out of this.

• 28:06Speaker 04

  Well, I mean, I get it, but it's also it is one of the biggest IPOs. The banks are all, you know, they've all been listed on the IPO. They're all participating in it. Is it just as simple as they all want the business? They also have some amount of influence over the index funds. So they're fulminating and change the rules?

• 28:25Speaker 05

  Yeah, I think of this quote from a story that two of my colleagues wrote last week for the Times. And there's this one fund manager who simply said, you know, if I miss out on the SpaceX IPO, someone's going to tap me on the shoulder and ask me why I wasn't in that. Whereas, you know, if I get burned on the SpaceX IPO, so many other people are going to get burned as well. So like, I have a way to cover my ass. And it's just, and you're just like reading this quote and you're like, what? Like, like, what is going on here? It's kind of a herd. He's just admitting to a herd mentality here. And that's what we're seeing here. And now multiply that by every, you know, retail investor who's getting marketing materials

• 29:08Speaker 05

  on Robin Hood, telling him, you know, oh, we have IPO shares available in SpaceX. Buy, buy, buy. And so it's, it's kind of unheard of.

• 29:16Speaker 04

  The normal market dynamic is some people will obviously heavily bet on SpaceX succeeding and some people would heavily bet against it. And you want that dynamic to find the right price.

• 29:25Speaker 05

  Right.

• 29:26Speaker 04

  For the stock. And here that just seems to be erased.

• 29:28Speaker 05

  I'll be interested in the, in the short kind of interest against the stock. I think that'll be very interesting. But if you look at Elon's track record, let's say Tesla, for example, and how the stock has gone up over the years there. I mean, he's completely crushed a lot of shorts there. And so, you know, he used to go to war against them. He used to tweet about them all the time. But the best way to beat short sellers is to continue, I guess, increasing the value of the stock, which, you know, Tesla has done over the years. And there's just like a sort of meme-ification of this whole thing. Like, this is not just a hype stock, but a meme stock in some ways. And, you know, that's what happens when you have a celebrity CEO like this running a company.

• 30:11Speaker 04

  That's what's really interesting to me because the Car sales are falling, you know, the product is not as successful as it once was. In many cases, the products are old, the Model S and Model X are being discontinued because they're so old and he doesn't want to spend money updating them. And now he's promising robotics and robo taxis and a bunch of other things that may never come to pass. Is he going to be able to pull the same move with SpaceX? Just continually promise something bigger to come in the future that changes the value dynamic of the company?

• 30:40Speaker 05

  He sort of is right now as we, as we speak, you know? He, what, what happened at the beginning of this year? Well, SpaceX was going along its way. It was a, a launch business with rockets that have self-landing capabilities and, and a really good business in Starlink. And what did he do? He combined it with XAI and said, actually, you know what we're going to do? We're going to put data centers into space and this is the future. And oh, by the way, we're going to put a factory on Mars to build these satellites to launch into space. And then we'll get to the Mars colony. You know, these are goals that have come up within the last year. He didn't talk about these things previously. And so in the same way at Tesla where he has completely pivoted the company towards

• 31:23Speaker 05

  robots and, and you know, the humanoid, whatever things, you're getting the same kind of effect at SpaceX where he's just selling people on a completely different bill of goods. I think it's just, it's just so interesting. I, I look at some of the contradictions he's made over the years. There's a tweet of his that he put up probably a year ago where he said, the moon doesn't matter. You know, we're not focused on the moon, we're focused on Mars. And then you go back and you look at the IPO documents and what he said more recently in the last couple of months, and now they're all in on the moon. And that's because, you know, NASA has put a renewed focus on the moon and there's money there. If you're going off of what Elon says, you know, it's, it's kind of whichever way the wind blows at this point. And thus far, that's worked for him.

• 32:06Speaker 05

  People are willing to go with him and believe in him.

• 32:12Speaker 04

  We have to take another short break here. We'll be back in just a minute.

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  We're back with New York Times tech reporter Ryan Mack. For the break, we're discussing all of the relevant factors swirling around the SpaceX IPO and, of course, the Elon of it all. But now I want to dig into the actual financials of the business to get a realistic idea of what this company actually is.

• 34:14Speaker 04

  So here we are, a half hour into a conversation about the SpaceX IPO, and we're going to talk about the fundamentals of the SpaceX business. Because that's about where it ranks, right? It's like the 15th thing on the priority list when you talk about the SpaceX IPO is the fundamentals of the business.

• 34:28Speaker 05

  Yeah.

• 34:29Speaker 04

  As you've said several times now, Starlink is the only profitable part of this business. It generated 11.39 billion in revenue last year. It goes up and down. Everything else is a gigantic money loser. The AI division had a deficit of 6.35 billion. The NASA contracts for launch lost 657 million. Everything else is losing money and then Starlink is the business that's growing and generating actual profits. I look at that, I think, boy, I've covered the broadband industry for a long time here at The Verge. AT&T and Verizon are not the world's sexiest businesses. They're not throwing off so much margin that you can lose $6 billion on AI for the rest of your life. How does that work? Is it, is there more Starlink to be had?

• 35:14Speaker 04

  Are we going to rip up all the fiber in the world? I'll get satellites? How do you generate enough money with Starlink to pay for all of this other stuff?

• 35:21Speaker 05

  I believe SpaceX thinks Starlink can continue to grow. There are a lot of markets it hasn't tapped yet. I think of something like India, for example, where the company is heavily courting, you know, the Modi government there to allow them to operate in a country with 1.5 billion people. And there are markets like that that it can access and continue to grow that roughly 10 million, I think, monthly active user base.

• 35:45Speaker 04

  Can I push that back on that just for one second?

• 35:47Speaker 05

  Sure.

• 35:47Speaker 04

  Yeah. You know, the Indian market is very complicated, but it is very well-served by its own telecom providers. Like Reliance Geo is the winner in the Indian market and a huge number of people just have a cellphone as their primary connectivity device. And they're doing fine and it's dirt cheap. Even if you're excited about putting Starlink in that market, how do you compete against that? Is it possible? Have they laid out the case?

• 36:10Speaker 05

  They have not. And you can also argue that the revenue per user there is not going to be the same as it would be in the US or wherever else. But yeah, they've made the argument that as long as it continues to grow, it's a good thing. They'll continue to launch more satellites into space with these things and cover the world essentially. Gwen Shotwell, the CEO, gave a presentation at Mobile World Congress earlier this year where she, you know, basically put out like a hit on all these big telecoms. And online, she's compared herself or compared SpaceX, you know, the David versus the Goliath, which is kind of a convenient narrative where you have a 1.25 trillion dollar David

• 36:51Speaker 05

  going against these supposed Goliaths here. I mean, I guess that's the bull case for Starlink, right? But if you look at the other fundamentals of this, like this spending on AI is quite nuts. Like, it's losing so much money on AI development. We haven't even talked about the massive amount it has to pay for Cursor, which is like a, what, $60 billion deal? You asked earlier, like, what are people investing in here? They're investing in promise. There's no fundamentals here. Like, we can talk till we're blue in the face about profits and revenues and growth, but like, at the end of the day, most investors are betting on Elon's words and his ability to sell them on this idea of putting data centers into space or getting people to Mars.

• 37:36Speaker 04

  The AI piece is fascinating. They're estimating that $22.7 trillion will be generated from enterprise AI services.

• 37:44Speaker 05

  Yeah, I want to talk about this TAM. It's just insane.

• 37:46Speaker 04

  TAM is a total addressable market. It is $28 trillion, I think, maybe slightly more.

• 37:51Speaker 05

  There's a great line in the S1, which is like, it's something like, "This is the largest TAM ever in human history." And I'm like, "Cool. Like, show me how you got there." And it's like, it's kind of just like, "Trust me, bro." You know, it's like, you know, "We got this. Like, we did the numbers." And it's, yeah, $23 trillion in AI. Three billion in rocket launches and sorry trillion, not billion. Um, I kind of mix those up all the time, but I don't know where the fundamentals are for that. Like, what are they basing that on? It's, it's, it's sure, it's in their S1, but uh, it's, it's a lot of trust me at this point.

• 38:28Speaker 04

  The case for this is going to be a great IPO because SpaceX figured out the Falcon nine in rocket reusability and they essentially have a monopoly on launch services in the United States, at least until Jeff Bezos and Blue Origin figure out whatever they're going to figure out. That's a pretty good case. Like, I can see that case. Starlink is a growing business. We have, we're essentially the default government contractor for a very important mission, both in national security and telecom and everything else that we satellites for. I see all of that. Why add on this totally illusory enterprise AI 22.7 trillion dollar TAM when you're up against OpenAI and Anthropic and Google? And Elon has admitted very publicly that XAI was, quote, "not built correctly and needs

• 39:12Speaker 04

  to be totally rebuilt." And we're selling compute capacity to Anthropic on the side.

• 39:16Speaker 05

  I think that TAM says everything, right? It shows where they think the addressable market is, which is in AI. And all the hype right now is around AI, which, you know, OpenAI or Anthropic and both are expected to go public, or at least file to go public, you know, Anthropic did today. Um, and so I think Elon saw that. And if you had just taken the old SpaceX business public, what does that look like? That's the launch business and that's Starlink? That's a solid business, right? Is it a 1.25, 1.5 trillion dollar business? No. But if you layer on all these promises of, actually, you know, we control getting things into space, so we're going to control getting data centers into space.

• 40:02Speaker 05

  And we're going to own all the data centers in space and everyone's going to have to rely on us to power, uh, you know, the future of the American economy. That's a much more...

• 40:13Speaker 05

  I guess bullish proposition and a much more valuable proposition and one that you can raise a lot more money on. And I think Elon sees this as kind of a singular opportunity to raise money. We're talking about fifty to seventy-five billion dollars in cash raise. You know, that's outstrips the current largest IPO, which was Saudi Aramco, a couple of years ago, that raised about thirty billion dollars. And so if you layer A on top of that, you get, you know, a lot of this hype that he can sell into and, you know, raise all that cash.

• 40:47Speaker 04

  What does he want to do with that cash?

• 40:50Speaker 05

  Of course, get people to Mars, you know?

• 40:52Speaker 04

  Yeah, that's obviously.

• 40:52Speaker 05

  You know, of course, you know, easy. Once you have fifty billion dollars, you can land a million people on Mars. Yeah, I mean, that's, you know, these are expensive propositions. Building Starship is an expensive proposition. You know, building data centers on Earth is an expensive proposition, buying up all those, all that compute, you know, buying up talent, buying companies like Cursor. So he needs that cash to do all those things and continue, you know, building up Musk Inc. Yeah, it's not like they're going to sit on this cash pile for a long time.

• 41:28Speaker 04

  Yeah, it occurs to me that Elon does not enjoy normal rich guy activities. Like, he's not buying boats. He doesn't have a fleet of cars. He doesn't have a lot of children. They're expensive. I've got two. They seem very expensive. I could use fifty billion dollars just for that. The AI piece of it is confusing to me because it doesn't seem like there's evidence that Elon's AI efforts are competitive.

• 41:50Speaker 05

  Right.

• 41:50Speaker 04

  Right? They're competitive in the fact that Grok has distribution on X. And I think a lot of these companies would love to have distribution that way, right? Like, the fact that X users can just talk to Grok whenever they want to do some unsavory things, but they still have distribution, right? It's just there in a way that, I don't know, the next, Claude does not have that distribution. But Anthropic is ahead in coding, right? Anthropic is ahead in a lot of places. OpenAI has Mindshare. Google has distribution in every way it can possibly have distribution. It's going to power the next version of Siri for Apple. How do you win? How do you raise all this money and say, we're going to have a twenty-two trillion dollar enterprise service at market when no one in AI thinks you're even close to the lead right now? Can you just buy the talent?

• 42:34Speaker 05

  I think XAI is clearly behind in the model war. You know, I saw this great tweet the other day that, you know, if Claude is Coca-Cola and OpenAI is Pepsi, then like Grok is like the RC Cola.

• 42:49Speaker 04

  You know, it's just. I knew you were gonna say RC Cola and I was pre-offended and here we are.

• 42:54Speaker 05

  Are you an RC? I could go with Faygo too for the juggalos out there. And, you know, I'm sure there's a lot of juggalos that like using Grok. But, you know, it's like the fourth or fifth or sixth best model, or at least in terms of popularity. And so can you build a business around that? Can that business be worth trillions of dollars? Probably not. There has been admission from Elon that, you know, it hasn't gone as well. You mentioned how he said the company was a built right. You look at the Cursor acquisition as, you know, they're trying to pay to get back in the game. You also look at this very interesting deal that the company has with Anthropic to rent out its compute to Anthropic of one of its main data centers that are built in Tennessee. Colossus, it has two data centers, Colossus one and Colossus two.

• 43:39Speaker 05

  It has since rented out one of these to Anthropic in a $1.25 billion a month deal. You know, Anthropic is paying that much to get access to that compute. And so you'd probably argue that if, if everything was going swell at Grok and at XAI, that they'd be using all that compute to, you know, push their own models and help their own customers. But in this case, it's become sort of an AWS type service where it's, it's renting out its space. And, you know, that's a good business, you know, I'm not gonna die that. But it's not what that thing was built for in the first place.

• 44:11Speaker 04

  Is there a way back for them to, to lead at the frontier? Is it, we're gonna, we're gonna raise $50 billion and maybe we'll just hire everybody from OpenAI?

• 44:19Speaker 05

  Potentially. I mean, and if you look at some of the comments last week from Elon on Twitter where he, or sorry, on X, where he pushed back on the idea that that Anthropic deal would be, you know, for the next three years. He said, we reserve the right to take some of that compute back. You know, he's suggesting, you know, maybe the models get, their models get good again to the point where they'll need that, that compute. So, you know, I think he. Changes with the wind, and I think his business plan changes with the wind. We've seen that in the last six months to a year, you know, these completely new businesses coming out of nowhere. And so I don't think there's ever like a never or a never again for Elon. And I guess he reserves the right to return to that at some point.

• 45:02Speaker 04

  So I want to end where we started, which is 2022, he buys Twitter, he renames it X. It's now famously the everything app and we're all doing our payments in there all day long. You wrote a lot about it, you wrote a whole book about it. I made the prediction that buying Twitter would trash his reputation and maybe harm his companies. Here we are on the cusp of what might be one of the biggest IPOs in history. And it seems like in order to make it work, all of the rules of the game have had to be changed or rigged to favor Elon. If we were operating in a normal circumstance with the normal rules, with the normal index fund seasoning rules, and he had to wait 90 days for profitability, and people are looking

• 45:44Speaker 04

  at the actual fundamentals of this business, do you think there's a chance that this IPO is as big as it's going to end up being?

• 45:51Speaker 05

  Probably not as big. I think it's hard to say. I still think there would be an incredible amount of hype around this company still. And, you know, you just don't get this type of excitement for any CEO beyond Elon Musk. You know, for a lot of people, he is still, they don't necessarily pay attention to his politics or his everyday posting on Twitter, his, you know, hate speech, or, you know, whatever thing he's concocting on the platform. They see him as a successful businessman, a generational talent that, you know, put Teslas on the roads and they see that every day. They see that as a chance to invest in him. And so I think there is still, there would still be a large amount of retail, you know,

• 46:36Speaker 05

  obviously not the same amount as like these, you know, having to force index funds to buy into a company. But I think that alone might drive a lot of success for this IPO. But again, completely hypothetical situation. So I guess we'll have to see in two weeks.

• 46:52Speaker 04

  I'm very curious. Do you think there are any other correctives? We've talked about the market correctives. We talked about the index rules. We talked about the corporate governance issues. Are there any other correctives here? Or are we just along for the ride?

• 47:05Speaker 05

  I thought about accountability for Elon for a long time. I mean, that's sort of the point of our book. How do you hold someone that rich accountable? And I just think the normal levers of accountability for someone like that have gone out the window. And yeah, we're along for the ride. I have one example in this IPO, which is shareholders, if you're a shareholder in SpaceX, you agree to arbitration for any issues around if you believe some kind of fraud or violation of securities laws happened. You know, in the past, Elon has faced lawsuits from shareholders at Tesla and Twitter. At SpaceX, he's essentially removed that ability to pursue

• 47:49Speaker 05

  those types of shareholder lawsuits. And so he's kind of stacking the deck for himself here and removing any of the obstacles he could face as a public company CEO and kind of entrenched himself in this company, built a pretty big motor around himself. And I think that the impact of that will be seen for years to come.

• 48:14Speaker 04

  Well, Ryan, it feels like no matter what, you and I are both going to end up as SpaceX shareholders. So I'll see you at the next meeting. Thank you so much for being on Decoder. This is great.

• 48:22Speaker 05

  Thanks for having me. I'll see you on Mars.

• 48:26Speaker 04

  One million strong, bro.

• 48:29Speaker 04

  I'd like to thank Ryan Mack for taking the time to join Decoder, and thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode, or really anything else at all, drop us a line. You can email us at [email protected]. We really do read all the emails. You can also hit me up directly on Threads or Blue Sky. Shows on YouTube. You can watch full episodes at DecoderPod. It's the same handle on TikTok and Instagram. As you know, the clips are a lot of fun. If you like Decoder, please share with your friends and subscribe wherever you get podcasts. If you really like the show, hit us with that five-star review. Decoder is production of The Verge and part of the Vox Media Podcast Network. Show is produced by Kate Cox and Nick Statt, edited by Ursa Wright. Our editorial director is Kevin McShane. The Decoder music is by Breakmaster Cylinder. We'll see you next time.

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