SpaceX bonds slide 5% after record $85.7 billion IPO as debt concerns mount

Elon Musk's Space Exploration Technologies Corp. raised $85.7 billion in its June 12 initial public offering, nearly tripling Saudi Aramco's 2019 record, before tapping debt markets less than two weeks later with a $25 billion five-tranche bond sale. The 2056 notes, a $3.5 billion tranche carrying a 6.65 percent coupon, have fallen every session since issuance, closing at 94.52 cents on the dollar on July 7 from an issue price of 99.45 cents — a decline of almost 5 percent in under a month.

"The relentless selling in SpaceX's longer-dated bonds suggests institutional investors are demanding a higher risk premium than the company's IPO pricing implied," said Thierry Borgeat, a credit strategist at Arvy Capital in Zurich. "The market is pricing in concerns about the company's ability to service this debt while managing its capital-intensive operations."

All five debt tranches, with coupons ranging from 5.35 percent to 6.65 percent and maturities from 2031 to 2056, are trading below par. The decline in the 2056 notes has pushed the annual yield above the initial coupon rate, indicating that bondholders want additional compensation for perceived credit risk. The selloff contrasts with the euphoria surrounding SpaceX's public debut, which valued the company at roughly $2 trillion.

The $20 billion bridge loan overhang

The most immediate pressure on SpaceX's balance sheet stems from a $20 billion bridge loan taken months before the IPO. The company used the facility to absorb $17.5 billion of junk-rated debt from Musk's other ventures, xAI and X, onto its own books. The terms require repayment within six months of listing — meaning SpaceX must find $20 billion by December.

While the IPO raised $85.7 billion, the company's prospectus outlined plans to deploy capital across AI infrastructure, Starlink expansion, and space technologies — commitments that leave less flexibility for rapid debt repayment. xAI, Musk's artificial intelligence start-up, has been burning cash, adding to the consolidated cash-flow strain.

Corporate bond prices reflect institutional judgment with less emotional distortion than equity markets. The persistent decline across all five SpaceX debt tranches suggests that credit investors see risks the equity market has yet to price in. If the trend continues, SpaceX could face higher borrowing costs in future debt offerings, potentially compressing margins on capital-intensive projects.

The pattern echoes the trajectory of other high-growth companies that went public near peak enthusiasm only to see debt markets turn first. After the 2021 SPAC boom, several issuers saw their bonds trade below par within weeks of listing while equity valuations held for months before correcting. For SpaceX, the December bridge loan deadline creates a defined catalyst: if the company cannot demonstrate sufficient cash flow or secure refinancing by then, the bond market's current skepticism could prove prescient.

This article is for informational purposes only and does not constitute investment advice.