Elon Musk's SpaceX said it has launched a five-tranche notes offering to raise at least $25 billion, as the newly public company seeks funding for its capital-intensive AI expansion, but the bond market takes a more cautious view.
The senior unsecured notes will be issued across 5-year, 7-year, 10-year, 20-year, 30-year tenors. Proceeds will be used to repay borrowings under its bridge loan facility as well as for general corporate purposes.
Among these, the final pricing for the bonds maturing in 2036 was set at 140 basis points above comparable US Treasuries, approximately 40 basis points higher than the average spread for similarly rated BBB bonds, highlighting that SpaceX is facing greater skepticism in the bond market, Bloomberg reported.
According to data compiled by Bloomberg, the average subscription for investment-grade bonds issued so far this year has been about four times the issuance size, whereas SpaceX's final order book was less than three times its issuance size.
The strongest demand in this bond offering was for the tranches with the shortest maturities and the lowest risk, the report said.
This preference, along with the premium SpaceX had to pay, likely reflects investor concerns regarding the company's cash flow situation.
SpaceX's AI ambitions carry a hefty price tag, requiring tens of billions of dollars in investment in data centers, computing hardware and power infrastructure.
While equity investors enjoy the upside of stock appreciation, bondholders do not share these benefits, and therefore, they must be adequately compensated for the risks they assume, Grant Nachman, founder and chief investment officer of Shorecliff Asset Management, told the report.
The offering, which is SpaceX's first investment-grade dollar bond issuance, has drawn nearly US$85 billion in orders, a source familiar with the matter told Reuters.
Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley are managing the sale, according to a document seen by Reuters.
Credit rating agencies assigned the company investment-grade ratings last week, signaling confidence in SpaceX's financial stability as it moves forward with its costly AI plans.
The rockets-to-AI firm's shares rebounded on Tuesday, following a recent selloff tied to a broader tech pullback, after a blockbuster debut on June 12.
Reuters and staff reporter
