Replacement Cost Approach Advantages and Disadvantages
In the previous article, we have already witnessed what replacement cost theory is and how it can be used to value sporting franchises. We now know the theoretical aspects of this type of valuation. We also know that the replacement cost approach is not used very widely when it comes to the valuation of sports […]
How are Organizational Aspects of Sports Leagues Linked to Finance
There are various types of sporting leagues across the world. These leagues cater to different sports in different parts of the world and are very different from one another. However, when it comes to certain organizational aspects of sports leagues, there is a high level of similarity between some leagues. These leagues are arranged in […]
Return on Assets (ROA) – Meaning, Formula, Assumptions and Interpretation
Another metric that is widely used by investors to gauge the profitability of a company is Return on Assets (ROA). More about this very important ratio has been stated in this article. Formula Return on Assets = Earnings / Asset Base Some calculations may include intangible assets while some others may exclude them from calculation […]
Debt Funding in Sports Franchises
Sporting franchises are also business organizations that operate just like other business entities. Therefore, just like other business entities sports franchises also require debt in order to fund their business. There have been various institutions such as banks and private equity firms that can provide these required loans to sporting franchises. Prima facie, it may […]
Bond Indentures and Covenants
When an investor thinks of bonds, they often think about the financial agreement between the investors and the borrowers. However, besides being financial instruments, bonds are also legal in nature. Each and every fixed-income security which is in existence has a contract that defines the rights and obligations which various parties have under different circumstances. […]
The world has seen many unconventional start-ups. However, almost all start-up companies derive their revenue from the earth. It is Elon Musk’s SpaceX that has opened up the investing community to a different dimension. Most of the businesses SpaceX is running and plans to run are related to outer space.
Research related to outer space has always been a grey area. On the one hand, it requires a lot of money. Any space-related mission requires hardware worth millions of dollars. On the other hand, any space-related mission also carries a lot of risks. There is a very high likelihood that the entire investment might be completely lost. Because of this high investment, high gestation period, and high risk, the job of managing outer space-related endeavors is generally taken care of by governments across the world.
Elon Musk’s SpaceX has revolutionized this space. It has created a commercial industry where one did not exist. Even though very little data is available about the financial numbers of SpaceX, it is known to be a mega success already. Top Wall-Street investment bank Morgan Stanley has stated that the firm could be looking at a valuation of more than $100 billion! This is a huge number for a company that was a start-up in the year 2002, with a seemingly impossible business idea.
However, since the company was being led by Elon Musk, investors had shown some interest in the firm. The firm was able to raise more than $20 billion scattered over several funding rounds. This article explains how SpaceX makes money and why is it considered to be a financially viable business model.
SpaceX has several different revenue streams. As the technology behind SpaceX has matured, the company has been creative enough to find different ways to monetize its core idea. The core idea of SpaceX is that it is a leader in outer space-related technology.
SpaceX aspires to be the company that can send its rockets to space at the cheapest cost possible and in the most efficient way possible. Some of the ways in which SpaceX earns revenue have been mentioned below:
We are all aware of the fact that government spending can be inefficient and wasteful. As a result, these companies had to shell out a lot of money to pay for these expensive satellite launches. Elon Musk’s SpaceX has given them a cost-effective alternative. SpaceX is able to generate a revenue of $62 million and a net profit of $12 million per launch. The company has been averaging between twenty to fifty launches per year!
SpaceX has signed several contracts with the Pentagon wherein it is making missile-tracking satellites that will be used for the national defense. SpaceX is able to generate a handsome profit margin on these contracts as well. This is what makes government contracts an attractive alternative source of revenue.
SpaceX has created rockets that can be reused seven times! Hence, even if SpaceX offers steep discounts to their customers for using second-hand rockets, they can still increase their profitability a lot by using these reusable rockets.
The satellite-based communication method will be an alternative to the fiber optic cable-based global internet network. The satellite-based network will be a game-changer and will be able to provide high-speed internet connection in the most remote parts of the world.
SpaceX is planning to use space technology to change the face of the telecommunication industry. Morgan Stanley has estimated that this business itself is likely to be worth $52 billion i.e. over half of Tesla’s projected net worth, that too within the next five years.
Right now SpaceX is charging more than $20 million per person for their space tourism program. However, the company plans to reduce the cost exponentially over time so that such travel is affordable for the upper-middle class as well.
The bottom line is that SpaceX is at the forefront of space technology. They are using technology to solve several problems in telecommunications and even tourism. This is the reason why SpaceX has become one of the fastest-growing start-ups in the history of the world.
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