SpaceX kicked off a bond sale Monday. Days after a record IPO. While disclosing it had $100.8 billion in cash just lying around.
Let me walk you through this. A company goes public. Raises historic amounts of money. Then immediately says hey, we'd also like to borrow some money by selling bonds. Oh and by the way, we've got over a hundred billion dollars in cash we forgot to mention. Just sitting there. Collecting interest. Probably in a checking account earning 0.01% because Elon's too busy posting to set up a sweep account.
The bond offering is senior unsecured notes. Which means if SpaceX goes belly-up, bondholders get paid before equity holders but after secured creditors. Perfect for the investor who wants exposure to rocket explosions but with slightly less downside than the guy who bought shares at the IPO peak four days ago. That guy's already down 18% and refreshing Reddit for confirmation bias.
A hundred billion in cash. That's not a war chest. That's not dry powder. That's a liquidity position so obscene it could fund a medium-sized nation's healthcare system. But sure, let's also sell some bonds. Diversify the capital structure. Give the fixed income boys something to do.
Here's what actually happened. SpaceX's CFO ran the numbers and realized they could borrow money at rates so low it's basically free. So why spend your own cash when Deutsche Bank will hand you someone else's? The IPO guys get their shares. The bond guys get their notes. And SpaceX gets to keep that $100 billion parked wherever it is. Probably a Fidelity money market fund called "Government Obligations Portfolio Class Z."
Retail traders who bought the IPO are currently Googling what senior unsecured notes are and whether they should've bought those instead.
Photo by Sven Piper on Unsplash
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