Yesterday all 3 major rating agencies (RAs) announced ratings for SpaceX. And the rationale is as bad as I thought it would be.

In my SpaceX article I pointed out a contradiction in their IPO filing – the $20B bridge loan document said the loan would be paid off via IPO proceeds. The S1's use of proceeds made no mention of paying down debt.

It's now clear that the bridge loan would need to be paid off, not by IPO proceeds, but via a new debt offering. Of course, it would be difficult for a company producing massive losses and negative free cashflow as far as the eye can see to raise debt without a credit rating. 

Enter the rating agencies. 

Yesterday all 3 RAs assigned BBB (BBB+/BBB/Baa1) ratings to SpaceX.  

Here are four particularly questionable points from their rating rationales:

1. Starlink as the cash cow:  I have yet to see reported on (and a subject of a coming post from me) how Starlink's "profits" are boosted by the fact that 75% of SpaceX's rocket launches are for Starlink satellites. 

The question I'm exploring which none of the RAs mentioned – Does Starlink absorb the full cost of the launches or is the US taxpayer subsidizing the Starlink launches via NASA overpayment? In other words, are Starlink's profits illusory? 

2. Growing revenue for leasing compute: As I pointed out in my recent posts, the Google and Anthropic leases are both cancelable within 90 days and were necessitated by a botched build of one datacenter by SpaceX. Anthropic's subsidized deal with SpaceX enabled them to dramatically lower compute costs which boosted their reported performance and Google's last minute pre-IPO lease was dubiously timed given their very large upside as an early investor in SpaceX. 

3. CapEx spend is discretionary: The rating agencies include in their rationale the notion that SpaceX will cut back on their CapEx in order to preserve cash. This is absurd. The ONLY way to remotely justify the valuation is via substantial capital spend.