OH, ELON! MUSK SPACES OUT!

 Shareholders of Vale are poised to vote on the future of one of Brazil’s most important companies as the sudden departure of its chair shines a spotlight on alleged political interference in the mining behemoth.

Vale’s chair Daniel Stieler resigned with immediate effect on Monday, just weeks after the board rejected a proposal to replace him by the group’s largest domestic investor, the pension fund Previ.

The corporate governance fight has led to renewed warnings of undue state meddling at the world’s largest iron ore producer, two years after a board member resigned over what they called “nefarious” influence in a chief executive succession process.

Vale, which is valued at $68bn, is a heavyweight in the global mining industry and considered of strategic national importance by the leftwing administration in Brasília.

As the retirement scheme for employees of state-controlled Banco do Brasil, Previ has been viewed in the past as a conduit by which governments have sought to influence Vale.

Previ, which owns a 7 per cent stake in Vale, faced a setback in its attempt to remove Stieler last month, when the board declined to recommend a vote on his future to shareholders.

But shareholders were still given the opportunity to vote at an extraordinary general meeting on July 22 on whether to remove him and elect a new chair. 

Following his resignation, shareholders will now choose between two current board members for the role, pitching vice-chair Marcelo Gasparino da Silva — who has warned the Previ proposal carried “a risk of political interference” in the company — against the pension fund’s choice, the lead independent director Manuel Lino Silva de Sousa Oliveira.

Previ has denied there was any government request behind the fund’s calls to replace Stieler, whom the pension fund originally nominated in 2023 and whose mandate was due to expire next April.

But it indicated that it believed that removing Stieler would allow Vale to improve its “strategic management” and strengthen the company’s corporate governance.

Last month, Adriana Chagastelles, director of equities at Previ, told the FT the pension fund had moved against Stieler as it wanted to appoint an independent chair ahead of next year’s contest for the role. From next year, Previ has indicated it will stop nominating future chairs, as part of a broader push to improve corporate governance and transparency.

Vale faced an earlier corporate governance crisis two years ago, when the government was forced to deny claims it had exerted pressure to appoint a controversial ally of leftwing president Luiz Inácio Lula da Silva as chief executive.

The Brazilian state formally only holds “golden shares” in Vale, which was privatised in 1997, allowing it to block actions such as a change in name or relocation of headquarters.

Gasparino, a lawyer, is also an independent board member for minority shareholders at state-controlled oil company Petrobras.

Oliveira is experienced in corporate finance and strategy, mainly in the mining sector.

Announcing Stieler’s resignation on Monday, Vale thanked the former chair and said his work had been “essential for strengthening corporate governance”.

RBC analysts on Tuesday said markets were “sceptical of Previ’s interference in Vale’s governance”, but that the election of an independent chair — “whether Marcelo Gasparino or Manuel Lino Silva de Sousa Oliveira — is a positive development from a corporate governance standpoint”.

SpaceX has secured buy ratings or the equivalent from a swath of Wall Street stock brokerages, lending further support to Elon Musk’s newly floated AI and rocket company.

Banks including Goldman Sachs, UBS and Morgan Stanley issued bullish recommendations for SpaceX’s stock on Tuesday, their first day of coverage following the end of the quiet period for banks that underwrote SpaceX’s mammoth initial public offering last month.

The ratings are used by investors to help inform their stock purchases, and come after the shares shot up from their IPO price of $135 to as high as $225 before falling back to close at around $160 on Monday, where they continued to hover in pre-market trading on Tuesday.

Morgan Stanley rated the shares as “overweight/attractive” and gave the stock a $300 price target, while Bernstein had an “outperform” rating and a $239 target.

Citi said its $200 price target for the end of this year “is a milestone along the path to $900+ which becomes realistic assuming key engineering achievements are demonstrated at scale”.

It added: “The successful deployment of Starship will establish the most affordable and scalable path to unlocking the economic potential of space . . . giving SpaceX access to trillion-dollar markets that no other company can tap into.”

SpaceX’s market capitalisation is currently around $2.1tn. A share price of $900 would value it at nearly $12tn, well above the value of the world’s biggest company Nvidia, which is worth about $4.7tn.

Wall Street is bullish on SpaceX

Bank	Share price target	Recommendation
Morgan Stanley	$300	Overweight/attractive
Goldman Sachs	$205	Buy
UBS	$210	Buy
JPMorgan	$225	Overweight
Citi	$200	Buy
Wells Fargo	$230	Overweight
Bank of America	$235	Buy
RBC Capital	$225	Outperform
Bernstein	$239	Outperform
Source: Bloomberg

UBS said SpaceX had “an unparalleled set of assets” in its reusable rockets and constellation of Starlink satellites, initiating its coverage with a buy rating and a 12-month target price of $210.

The Swiss bank also said advances in chatbot Grok and SpaceX’s acquisition of AI coding start-up Cursor were “poised to narrow the gap” between SpaceX and frontier labs OpenAI and Anthropic.

In an illustration of what has been described as a “lottery ticket” mentality in the market around the SpaceX IPO, UBS described the company as a “call option” — a derivative giving the holder the right to buy — for investors as “Elon Musk looks to fulfil his vision of making life multiplanetary”.

Bank of America has a $235 price target. According to the bank’s estimates for 2027 earnings, the company is currently trading on a price-to-earnings ratio of 118 times, dropping to about 43 times earnings in 2028. In comparison, the Nasdaq 100 index, which SpaceX joined on Tuesday, trades on 23 times forward earnings, according to Bloomberg data.

“We think investors should view much of SpaceX’s long-term value . . . through an option value lens,” the bank said in its note. “While the economic contribution of many future space markets is uncertain today, SpaceX owns the enabling infrastructure that would be required if such markets develop.”

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Many of the analysts acknowledged the uncertainty implicit in their projections. Morgan Stanley analysts set an “intentionally wide” range of possible outcomes for the share price, from a $75 bear case and $600 bull case, “balancing SpaceX’s unique ability to capture the expanding space and AI opportunity against material execution, funding and technology risk”.

However, the bank was ultimately optimistic about the company’s future, describing it as “the final frontier” of AI and writing that SpaceX was “one of the few platforms that can link real estate in orbit, global connectivity and compute capacity in one infrastructure stack”.

The potential of Cursor — a code-editing start-up that SpaceX acquired the right to buy earlier this year — is under-appreciated by the rest of the market, the bank added.

SpaceX’s entry into the Nasdaq 100 will force tracker funds tied to the index of largely tech stocks to buy it.

Companies usually have to wait up to a year after listing to gain entry into major indices that are tracked by funds with trillions of dollars under management. But SpaceX was able to secure early entry from Nasdaq, FTSE Russell and MSCI.

SpaceX and Adam Jonas! It’s a dream collaboration, where “dream” can mean any of these . . . 

Here’s paragraph one of the Morgan Stanley’s SpaceX initiation note:

With an ‘X of 1’ position in space infrastructure, we believe SpaceX can convert energy into intelligence at scale with optionality to monetize through a range of consumer and enterprise solutions for the next era of AI… the final frontier.

Jonas — formerly the Wall Street bank’s Tesla and occasionally other auto companies analyst — was last year reallocated to the sort of free-radical futurologist role we’d thought had been cornered by Shingy.

The SpaceX float gave second billing to Morgan Stanley, potentially for reasons alphabetical. So, with the research blackout for SpaceX’s main bookrunners now lifted, Jonas can be frontman to MS’s team of eight as they seek to explain to clients why a $2tn telecoms operator and government engineering contractor is a good purchase on fundamentals all the way up to 567 times forward earnings:

We initiate coverage of SpaceX at Overweight with a $300 price target. SpaceX combines near-monopoly launch economics, the world’s largest LEO satellite network, and a fast-scaling AI infrastructure business. We see the company as one of the few platforms that can link real estate in orbit, global connectivity, and compute capacity into one infrastructure stack. Our base case models revenue rising from $45bn in 2026 to $319bn in 2030 and $3.3tn in 2040, with the largest upside tied to Starship, Starlink capacity, terrestrial compute, and orbital compute.

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Too complicated, AJ. Explain it to me like I’m five:

Not five months . . . 

Better! Though maybe, as an investment case, “AI informs infrastructure improvements” feels a little woollier than “space enables satellite network”. Space demonstrably exists. Things that don’t exist yet include fully reusable rockets, orbital data centres, pocketable high-bandwidth satellite phones and profit from operating large language models at scale. That doesn’t mean they never will; it just means we might want to incorporate a bit of caution around the timelines for development and commercial adoption.

Or not!

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Starting with the reusable rockets, MS expects SpaceX to eat itself. Launch costs will collapse by more than 99 per cent versus their historical average within 10 years, it says. Operating margin on launches will have jumped to about 40 per cent, from around negative 50 per cent currently, but 40 per cent of less than 1 per cent still isn’t very much.

That’s why the Space bit of SpaceX provides just 3 per cent of MS’s base-case valuation. “The segment is largely treated as a cost centre for the broader company rather than a standalone launch-maximisation business,” say Jonas et al.

For Starlink, MS forecasts an impressively precise $687.7bn in revenue for 2040. Last year it did $11.4bn.

Longer term, there’s a whole world out there of redundant connectivity. “[T]he primary driver is Starlink becoming a connectivity layer for every data-transmitting device that needs reliable coverage beyond the reach of terrestrial infrastructure,” it says.

The other half of the MS model is data centres. “Orbital compute deployments” start in 2028, reach cost parity with their earthbound equivalents by 2031, and put 364GW of rigs in space by 2040. To put that figure in some kind of context, it’s about 40GW shy of the global operating nuclear capacity:

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Finally, Grok:

Enterprise AI is the largest opportunity in our model, with SpaceX able to monetize across three layers: neocloud compute rental, managed AI infrastructure, and full enterprise applications. We model AI revenue rising from approximately $22bn in 2026 to $190bn in 2030 and $2.6tn in 2040, with Enterprise AI representing the majority of the segment over time. Near term, we expect neocloud to drive most revenue given tight compute supply and recent Anthropic (disclosed in S-1), Google (signed early June), and the reported Reflection (not confirmed by company) agreements, which we estimate represent roughly $28bn of annualized revenue runrate through 2029.

Longer term, we expect SpaceX to push beyond raw compute rental into higher-value software and workflow automation. Cursor, Grok Enterprise, Macrohard, and agentic AI tools could help shift revenue toward coding, digital agents, robotics, autonomous operations, enterprise workflows, and other AI-enabled services.

Sounds expensive! But, SpaceX having raised $85.7bn with a(n underwhelming) share sale and $25bn with a (badly received) bond issue, it has to be too soon to be talking about fundraisings.

Or not! 

We currently model the company funding growth through non-convertible debt, but future equity dilution remains a material risk if debt markets cannot absorb SpaceX’s financing needs or if credit rating agencies conclude that additional leverage would pressure the company’s credit profile. In that scenario, SpaceX may need to issue equity, reduce growth investment, or slow its deployment plans. We would also note that SpaceX included the following blurb in an amendment to its S-1: “We may issue a significant amount of equity in connection with future transactions.”

In our model, we estimate SpaceX raising an average of $72bn annually between 2027 and 2030 and then an average of $95bn annually between 2031 and 2034. However, note that the mix of funding shifts dramatically towards cash from operations vs. debt financing over this time horizon and gross leverage / EBITDA stays well under 2x in all forecast years.

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A $668bn funding obligation to 2034 that delivers free cash flow that year of negative $48bn sounds less than ideal, though FCF might flip positive to $138bn in 2035 if everything goes to plan, so that’s nice. The SpaceX CEO presumably has a long history of delivering products on time and to the required specification that can support such confidence.

Given how little extant business there is to work with, the team has been inventive in how it back-engineers a headline valuation. At $300 per share the Space and Connectivity side of SpaceX would be valued on par with Tesla while the rest gets a Palantir valuation, and at 56 times 2028 EV/Ebitda and 21 times EV/sales, respectively.

For any investor who prefers wholeco to sum-of-the-parts, MS suggests the rarely used EV/Ebit/growth ratio. Pricing SpaceX at $300 translates to 0.41 times 2028 EV/Ebit/growth, which places the stock below the 25th percentile of peers — the peers being any other big company that’s similarly hope and hype:

Forecasts are the last thing anyone pays attention to in a Jonas note, however. Working through this one, it becomes fairly easy to spot which of its authors wrote which bit.

For example:

Why go to the Moon?

The Moon is not the end goal for SpaceX, but it could become the most practical near-term platform for learning how to live, build, and manufacture away from Earth. The Moon is roughly three days from Earth versus months to Mars, has more frequent launch windows, and offers a lower-gravity environment that could make surface-to-space logistics easier over time. In our view, the lunar opportunity is best seen as a call option on future space infrastructure rather than a near-term revenue driver.

[..,]

And shortly after that . . . 

Helium-3: The Moon’s most strategically important resource?

Helium-3 is one of the clearest examples of why lunar infrastructure could matter. The isotope is extremely rare on Earth, with current supply largely tied to tritium decay, but the Moon has accumulated helium-3 for billions of years because it lacks Earth’s atmosphere and magnetic field. NASA mining concepts often assume concentrations around 20 parts per billion, meaning helium-3 is abundant in total but painfully diffuse, requiring hundreds of tons of regolith to be mined and heated to recover small quantities. For quantum, helium-3 is important because dilution refrigerators use helium-3 and helium-4 mixtures to cool quantum processors to millikelvin temperatures, reducing thermal noise and helping preserve fragile qubit states. For fusion, helium-3 is attractive because deuterium-helium-3 reactions could generate charged particles instead of most neutron output, potentially reducing radiation damage, shielding needs, and longlived radioactive waste versus deuterium-tritium fusion.

Awesome! Also, did we mention the $600 bull case?

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For posterity if nothing else, we’ve screenshotted the MS forecast tables for income and cash flow. And in case you’re wondering, at no point in the initiation note’s 141 pages does Jonas explain what “an ‘X of 1’ position in space infrastructure” actually means.

Further reading
— Tesla, magical thinking, and the madness of obsession
— SpaceX: the final frontier of IPOs