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Posted in: Business NewsOp-ed
Published:
February 9, 2020 6:00 PM UTC

How a SpaceX Starlink IPO Could Make Elon Musk Richer Than Jeff Bezos

A SpaceX chief recently said Starlink could be spun off into a publicly traded company. That could make Elon Musk richer than Jeff Bezos.

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  • SpaceX’s chief operating officer recently told investors its Starlink project would be the “right kind of business” to take public.
  • That won’t be for a few years, but if Starlink does IPO, it could be enough to rocket Elon Musk past Jeff Bezos as the world’s richest founder.
  • Here is some back of the napkin math for how it could happen.

SpaceX could spin off its Starlink business into a a publicly traded company. That’s what SpaceX chief Gwynne Shotwell told investors at a private meeting in Miami.

The satellite Internet project will likely be a cash cow without being a cash furnace like Tesla (NASDAQ:TSLA) and other tech companies. It’s exactly the kind of business investors want a piece of.

But it won’t go public any time soon. Probably not for several years. If it does though, it might be the added boost Elon Musk needs to overtake Jeff Bezos in the billionaire rankings. But he’ll also need that big Tesla payout to become the richest founder in the world. Here’s the math.

Jeff Bezos’ Net Worth Is $125 billion

It moves up and down based on Amazon stock (NASDAQ:AMZN) fluctuations but Jeff Bezos’ personal net worth is something like $125 billion this week. By contrast, Elon Musk “only” has around $38 billion to his name at the moment.

So he has a long ways to go to beat Jeff. And he would leap frog several other ultra-wealthy people to get there if he does. If he gets the mother of all bonuses from the extraordinary compensation package he negotiated in 2018, Musk could get within range of Bezos. A Starlink IPO could take him the rest of the way.

Musk has an extremely risky pay plan. But if it pays off, it’ll be the most lucrative executive compensation in history. If he builds Tesla into a $650 billion company by 2028, he’ll receive a cash bonus of $55.8 billion.

On top of that, equity compensation will grow his currently 19% stake in Tesla, to a whopper 28.3% stake. Assuming Musk doesn’t sell any of his Tesla stock between now and 2028, he would then own $184 billion in Tesla stock.

How Starlink Could Help Musk Top It

$184 billion would be enough to make Musk far richer than 2020 Jeff Bezos even accounting for (historically normal levels of) inflation. But Bezos is a moving target. Amazon has some big challenges ahead. But it won’t be sitting still for the next eight years.

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Let’s assume a 10% annual growth rate for Amazon stock between now and 2028. That is a conservative estimate. Some analysts are saying shares could trade for $5,000 by 2025. That is an unusually bullish forecast.

But Amazon’s annual ROI has been far more than 10% over the last eight years. And it’s an ultra-large cap tech company with monopolistic qualities and enormous upside potential in its cloud business. So the historical average 10% ROI of the benchmark S&P 500 is a bearish forecast.

If Amazon merely grows 10% a year between now and 2028, Jeff Bezos’ 59.1 million AMZN shares will be worth around $263 billion. That would dwarf Musk’s potential 2028 net worth by $79 billion.

Here’s where SpaceX and a Starlink IPO comes in. Elon Musk owns about 54% of SpaceX, which is equivalent to about $18 billion. Assuming a 10% yearly ROI on that, same as for Amazon above, Musk’s share in the space firm will be worth around $38.5 billion in 2028.

He would be just $40.5 billion short of catching up to Bezos. Starlink could make up the difference. Estimates are it could cost as little as $10 billion to deploy. And could rake in as much as $50 billion a year. That’s more than AT&T’s DirecTV, which AT&T (NYSE:T) bought in 2015 for $67 billion.

Now we’re talking about numbers that could take Elon Musk to that number one spot. If a Starlink IPO values the satellite Internet company at $75 billion by 2028, Elon Musk could be the richest founder in the world.

Disclaimer: The reports and opinions in this article do not represent investment or trading advice from CCN.com.

This article was edited by Sam Bourgi.

Last modified: February 7, 2020 5:50 PM UTC

W. E. Messamore @thehuli

Markets Contributor for CCN living in Nashville, Tennessee. Bachelor of Business Administration from Belmont University in 2009 (majored in Entrepreneurship). Organized Senator Rand Paul's first and second online fundraisers in 2009. Correctly predicted the bitcoin bull market of 2019. Roving editor for the Independent Voter Network since 2013. Email me | Follow Me on Twitter (followed by: fmr Rep. Ron Paul (R-TX), Sen. Rand Paul (R-KY), fmr NM Gov. Gary Johnson, and Rep. Thomas Massie (R-KY))

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