FT : EU states back ban on destruction of unsold clothing

EU states back ban on destruction of unsold clothing
Textile industry accounts for a fifth of the bloc’s greenhouse gas emissions

EU member states have backed a ban on the destruction of unsold clothing in a bid to curb waste from the textile industry, which accounts for a fifth of the bloc’s greenhouse gas emissions.

Almost 6mn tonnes of textiles are discarded by EU citizens each year but only a quarter of those are recycled, according to European Commission estimates.

The ban would further boost Brussels’ green credentials but comes as industry leaders and politicians warn that too much environmental regulation risks stifling European economies. French president Emmanuel Macron on Thursday called for a “regulatory pause” on new environmental measures, so Europe can focus on applying existing laws.

Items that are returned by consumers to shops are complex for retailers to process and so often are discarded or destroyed. Designer brands also frequently destroy unwanted stock to prevent it appearing on the black market. British retailer Burberry revealed that it burnt £28.6mn worth of unsold merchandise in 2018, a practice it later stopped after a backlash.

Brussels presented a plan in March last year to encourage recycling and reuse of products across the bloc. It noted “the destruction of unsold consumer products, such as textiles and footwear” has become “a widespread environmental problem” owing to rapid growth in online sales.

However, the commission did not specifically ban the destruction of unsold clothing, instead requiring all large companies to report on quantities of discarded stock.

EU member states on Friday supported a tougher approach, backing a specific ban on the destruction of “apparel or clothing accessories”, according to a draft of the proposal seen by the Financial Times.

This came despite efforts earlier this week by countries such as Sweden, which is home to the retail giant H&M, to remove the ban from the text.

France, Germany and the Netherlands were among the member states who pushed to include the proposal in the new, so-called “ecodesign requirements” set by the EU.

“It’s very much in line with what we have as a goal as the EU in terms of environmental and recycling goals,” said one EU diplomat backing the proposal. “I don’t think it will be an extra burden [for businesses].”

Another diplomat said there was a risk that recycling or processing clothing to prevent it being destroyed could push up prices for consumers.

According to the draft, small businesses would be exempted from the ban and medium sized businesses, those with up to 249 employees and with annual turnover lower than €50mn, would be given longer to adjust. Details are still under discussion.

The proposal will need to be signed off by EU ministers and agreed with the European parliament before it can become law. Member states are expected to vote on the text on May 22.

Some member states also wanted the requirements to apply to electronic devices and shoes, which are classified differently to clothing, according to two people close to the discussions. Germany secured an exemption for cars, which are already subject to several pieces of EU legislation regarding recycling.

The “ecodesign” proposals also include a “product passport” to provide information on how products have been made and requirements on online marketplaces to ensure they offer compliant products.

Several member states, including France, have already enacted laws banning destruction of consumer goods, and the original commission proposal states that the measures will also prevent single market distortions, as well as reducing the environmental impact of the textile sector.

CrucnhBase : The Week’s 10 Biggest Funding Rounds: Uveye, Amino Lead Another Slo

The Week’s 10 Biggest Funding Rounds: Uveye, Amino Lead Another Slow Week For Big Rounds

If you are looking for positive news about the venture capital market picking back up, you can stop reading now. In fact, this week proved a stark contrast to just a year ago — when the venture market was already in decline. This time last year, 15 U.S.-based startups raised nine-figure rounds (you can read about some of them here). This week there was one.

Last year, it took $109 million to grab the 10th spot on this list — this week it took only $12 million.

We know the salad days of 2021 are long gone, but it seems like startups may well soon crave the “slowdown” of 2022.

1. UVeye, $100M, automotive: This was a big week for automotive safety (as we covered). Qualcomm bought Autotalks — a maker of chips used in crash-prevention technology — this week. In addition, UVeye, which develops automated vehicle-inspection systems, raised a $100 million Series D led by Hanaco VC. The Detroit-based startup’s platform uses a combination of proprietary algorithms, artificial intelligence, machine learning, sensors and more to detect external or mechanical flaws in cars. Basically, it performs a full physical on your automobile. The startup will use the new cash to start production of UVeye inspection systems in North America, support further sales growth and grow its market. Founded in 2016, the company has now raised nearly $196 million, per Crunchbase.

2. Amino Health, $80M, health care: Finding the right doctor and the right care can still be a problem, even if you have health care insurance. San Francisco-based Amino Health, a digital health care guidance company, wrapped up an $80 million round — a mix of equity and debt — led by Transformation Capital and Oxford Finance to help with exactly that. The company’s platform allows users to digitally navigate to find quality, cost-effective care through their health plans and benefits. The startup now has 1.6 million members. Founded in 2013, the company has raised $125 million, according to Crunchbase.

3. 8fig, $40M, finance: E-commerce companies need significant capital for operations, as inventory and supply chain expenses can eat into a startup’s cash flow. However, with a slowing venture capital market, alternative financing models are needed. Enter Austin, Texas-based 8fig, which closed a $140 million Series B — reported as $40 million in equity and $100 million in a credit facility. The round was led by Koch Disruptive Technologies. The company provides growth plans for small and medium-sized e-commerce businesses that have some sales history. The plan includes funding and financial tools for supply chain management, financial planning, and freight and logistics coordination. 8fig has provided online sellers with more than $500 million since being founded, and increased its annual revenue by 800% last year. 8fig — founded in 2020 in Israel — has now raised $196.5 million to date, according to the company.

4. (tied) Cullgen, $35M, biotech: San Diego-based Cullgen, a biotechnology company developing small molecule therapeutics, raised a $35 million Series C financing round led by AstraZeneca-CICC Venture Capital Partnership. The company also raised an additional $5 million this week when GNI Group elected to exercise its outstanding warrants for Cullgen stock. The startup is dedicated to developing new chemical entities for the treatment of what it calls “diseases lacking effective therapeutic approaches.” Founded in 2018, the company has raised a total of $106 million, per Crunchbase.

4. (tied) Petal, $35M, fintech: New York-based Petal closed a $35 million funding round led by Valar Ventures. The fintech firm brands itself as trying to help underserved consumers financially succeed. The company uses its own platform for cash flow underwriting which serves as an alternative to traditional credit scores and makes credit more accessible. Founded in 2016, the company has raised more than $750 million, per Crunchbase.

6. Wellthy, $26M, fintech: New York-based Wellthy, a family care concierge service, raised a fresh $25.5 million in funding. No lead investor was named, but new investors include Citi Impact Fund and Stardust Equity. Founded in 2014, the company has now raised $78 million, according to Crunchbase data.

7. Sealonix, $20M, medical devices: Bedford, Massachusetts-based Sealonix, a developer of hemostatic sealants for surgical use, closed a $20 million Series A led by Excelestar Ventures. Founded this year, this is the company’s first outside round, per Crunchbase.

8. Cloverly, $19M, cleantech: Atlanta-based climate platform Cloverly raised a $19 million Series A led by Grotech Ventures. Founded in 2018, the startup has raised $21 million, per Crunchbase.

9. Solarea Bio, $15M, biotech: Cambridge, Massachusetts-based Solarea Bio, a clinical stage biotechnology startup developing food-derived microbial-based solutions, closed a $15 million Series B led by S2G Ventures. The company said it is targeting a total of up to $25 million for the round. Founded in 2017, the company has raised $26 million, per Crunchbase.

10. (tied) Three companies tied for the last spot this week, with New York-based financial media startup Blockworks, Nashua, New Hampshire-based manufacturing analytics platform Datanomix and New York-based medical equipment firm Optain all announcing rounds of $12 million.

FT : G7 finance ministers warn of ‘uncertainty’ on global economy

G7 finance ministers warn of ‘uncertainty’ on global economy
Officials say regulatory gaps in the banking system need to be addressed

G7 finance ministers have warned of “heightened uncertainty” surrounding the global economy and the need to address regulatory gaps in the banking system in the wake of financial sector turmoil.

“The global economy has shown resilience against multiple shocks,” finance ministers of the world’s most advanced economies said in their final communique after a three-day ministerial meeting in Japan on Saturday.

“Nevertheless, we need to remain vigilant and stay agile and flexible in our macroeconomic policy amid heightened uncertainty about the global economic outlook.” 

The finance ministers also noted the need to fill “data, supervisory and regulatory gaps” in the banking system that have come to light following the March collapses of Silicon Valley Bank and Signature Bank and the failure of First Republic in recent weeks.

The US and its G7 partners have made removing sanctions loopholes and combating evasion their priority in recent months as, more than a year after Russia’s full-scale invasion of Ukraine, the appetite for imposing restrictions on new parts of Russia’s economy wanes.

Against that backdrop, the finance ministers also agreed to strengthen sharing of intelligence on possible sanctions dodging, and monitor the effectiveness of the price caps on Russian crude oil and petroleum products. “We remain committed to countering any attempts to evade and undermine our sanction measures,” the communique said.

The G7 committed to provide economic support of $44bn to Ukraine, enabling the IMF’s approval of a four-year lending programme worth $15.6bn.

“It was a big achievement for us that the G7 was able to strengthen its unity rather than going in separate ways to address major international challenges,” Shunichi Suzuki, Japan’s finance minister, said on Saturday.

According to people briefed on the discussions, Brussels is also discussing restrictions on certain EU exports to countries that it suspects are re-exporting sanctioned products to Russia to prevent critical components from ending up on the Ukrainian battlefield.

Ahead of the finance ministers’ meeting, US Treasury secretary Janet Yellen had called for “co-ordinated action” by G7 nations against Beijing’s use of economic coercion. The G7 agreed to launch a framework for supply chain collaboration in clean energy by the year-end but the 14-page document contained no reference to economic security concerns related to China.

Yellen made the comments as Washington finalised a new outbound investment-screening mechanism aimed at China.

A senior Japanese finance ministry official acknowledged that the issue of economic coercion was raised during the meeting, but declined to comment on details and on whether China had been mentioned in those discussions.

Following Yellen’s remarks, China’s foreign ministry said on Friday that it was “the victim of US economic coercion”, citing sweeping export controls the US rolled out in October that would severely complicate efforts by Chinese companies to develop cutting-edge technologies with military applications.

“If any country should be criticised for economic coercion, it should be the United States. The US has been overstretching the concept of national security, abusing export control and taking discriminatory and unfair measures against foreign companies. This seriously violates the principles of market economy and fair competition,” spokesperson Wang Wenbin said.

FT : French football club PSG prepare for a summer revamp

French football club PSG prepare for a summer revamp

PSG: changing guard, changing business model

The GOAT era at Paris-Saint Germain is drawing to a close. Having assembled the highest paid team in football history, the superstar lineup is breaking up.

Argentina’s World Cup winning captain Lionel Messi looks set to be the first to quit the Qatar-owned team. He was recently suspended and fined for missing training — instead hopping over to Saudi Arabia, where he is a tourism ambassador. He may end up becoming a more permanent resident, with Riyadh-based Al-Hilal one of his potential next destinations. Barcelona and Inter Miami are both also in the mix.

Brazilian forward Neymar, still the most expensive signing in football history, is expected to follow Messi through the exit, with other high profile — and high paid — departures likely to follow.

France’s most successful club is in transition, and hopes to replace some outgoing players with talent from its youth academy — a way to cut costs and reconnect with the increasingly disgruntled fans.

Uefa’s new spending rules have helped force PSG’s hand. Starting next season, clubs competing in European competitions must limit spending on players and coaching staff to 90 per cent of revenue, a figure that will gradually drop to 70 per cent.

Across Europe, PSG is the club most in need of belt tightening. The wage bill hit 109 per cent of revenue last year, according to figures from data provider Football Benchmark.

In return, the club is on track to win another French title — its 9th under Qatari ownership — but failed to reach the quarter finals of the Champions League. Stars have come and gone, but victory in football’s top club competition has remained elusive.


The overhaul at PSG has major implications for French football. According to estimates from sports intelligence provider Twenty First Group, PSG’s chances of winning the league next season drop from 59 per cent to 42 per cent without Messi and Neymar. That introduces a level of competitiveness sorely lacking in Ligue 1, making it more exciting and potentially boosting interest over the long-term.

However, PSG is the only French club with global reach and household names on the team sheet. Just as Ligue 1 puts its broadcast rights out to tender, French football is about to lose some of its greatest marketing assets.

The exodus also raises questions about PSG’s plans to raise new capital. The Qatari owners have been in talks to sell a stake in the club since last year, with a target valuation of over €4bn.

The club still doesn’t own its stadium, and with a dwindling roster of big brand players, investors might wonder what exactly they are buying into.

FT : ECB too lax in supervising Europe’s largest banks, watchdog warns

ECB too lax in supervising Europe’s largest banks, watchdog warns
European Court of Auditors seeks assurances that credit risk is being ‘properly managed’

The European Central Bank is too lax in supervising the eurozone’s largest lenders, the EU’s external auditor has said, as it called for greater assurances that “credit risk is properly managed and covered”.

The auditor hit out at the ECB for being insufficiently aggressive in pushing eurozone banks to reduce high levels of non-performing loans.

Friday’s detailed critique by the European Court of Auditors also accused the ECB of being too slow to decide capital requirements and lacking sufficient staff.

Banks on both sides of the Atlantic have come under increased scrutiny in recent weeks after the failure of several US lenders and the forced rescue of Credit Suisse.

The European auditor, which focused on the supervision of 10 lenders with high levels of bad debt, said ECB officials were too hesitant to use their full powers and applied them unevenly.

“Those with a higher share of non-performing loans were given more time than the others, and banks could choose a coverage approach that was most advantageous to them,” the report stated.

An ECB official said the auditors “didn’t understand that the disposal of NPLs consumes capital, as the banks have to accept a price below book value.

“Hence if we raised too much the capital requirements they would have made less disposals not to breach the requirements, and NPL volumes would have been slower to drop. The calibration at the bottom of the range was based and conditional on the banks’ plans to reduce NPLs.”

It maintained that it had ultimately achieved its objective, as toxic debts had fallen steadily from more than €1tn eight years ago to below €350bn last year, equal to less than 2 per cent of total loans.

In response to the auditor’s criticisms, the ECB said it would set banks’ capital requirements more speedily — a process the watchdog found took 13 months from the end of the relevant reporting period.

It also committed to address staffing shortfalls that left it unable to carry out a quarter of its prioritised investigations of banks’ internal risk models and 10 per cent of on-site inspections.

However, the central bank rejected some of the recommendations and said others had already been addressed since a team of external auditors examined the central bank’s supervision of lenders in 2021.

Its methodology for setting bank capital requirements “ensures that all material risks to which an institution is exposed are appropriately covered”, it said.

The ECB was given responsibility for overseeing the most important eurozone lenders after a banking meltdown and sovereign debt crisis that ripped through the region more than a decade ago. This led to the creation of its Single Supervisory Mechanism in 2014 as a separate unit from the central bank’s monetary policy operations.

“Our overall conclusion is that the ECB [has] stepped up its efforts in supervising banks’ credit risk, and in particular non-performing loans,” the European Court of Auditors said in its 121-page report. “However, more needs to be done for the ECB to gain increased assurance that credit risk is properly managed and covered.”

The auditors issued three main recommendations for the ECB: to streamline its supervisory process, strengthen its risk assessment of banks and use more effective measures to make banks manage risks better.

The central bank accepted the first recommendation, saying it was “considering ways to reduce” the time it takes to set bank capital requirements. But it only partly accepted the other two recommendations, rejecting a call for it to lift a hiring freeze imposed across all the ECB’s existing activities this year.

The ECB said some staff had been added in place of external consultants.

It would review next year if “more formal escalation processes” were needed to push national central banks to provide more staff to joint teams. It said there was still a 4 per cent staff shortfall at the supervisor, which employs about 1,600 staff.

Some concerns had already been addressed, after a review last year of its methodology for assessing credit risk and the addition of an “independent supervisory risk function” that acts as a second line of defence on setting banks’ capital requirements.

FT : The relative decline of the M&A banker

The relative decline of the M&A banker
The pay and prestige of deal advisers at the big firms have slipped

Once upon a time, if you wanted high pay and high prestige on Wall Street, you aspired to be a mergers and acquisitions banker, the person who advised corporate chief executives on their most important strategic deals.

And if you wanted the highest pay and the highest prestige, you aspired to be an M&A banker at groups such as Goldman Sachs, Morgan Stanley, Lazard and First Boston, the places where the biggest and most exciting M&A deals were happening.

In those days, it was nothing for a first-year M&A managing director at Morgan Stanley to be paid $1.5mn, or more. And if you were a rainmaker such as Felix Rohatyn, at Lazard, or Bruce Wasserstein, at First Boston, your pay was easily in the tens of millions of dollars a year, back when that was still considered real money.

No more. A host of factors have conspired in the past 25 years to reduce the pay and the prestige of the M&A adviser and other investment bankers — such as those who specialise in executing debt and equity underwritings — to levels that once would have been considered unacceptable.

What used to be first-year managing director pay of $1.5mn is now more likely to be $800,000, bankers tell me. That is still a lot of money but not quite what it was when M&A bankers were the alpha males of Wall Street. “And it’s not coming back,” one top longtime M&A banker told me.

There are myriad impediments to investment-banking specialists getting paid like they used to. At most of the big Wall Street banks, investment banking is no longer a driving force of the business — in fact, it is increasingly subordinated to less flashy areas such as wealth and asset management, trading, traditional lending and credit-card receivables.

With the overall volume of investment banking revenues down considerably from the absurdly high pandemic levels, lowering investment banking remuneration is the easiest way to cut expenses quickly. And the big banks are reducing compensation-to-revenue ratios without apology. Where once the compensation expense ratio was in the low 50 per cent of revenue in investment banking, the percentage is now in the 30s.

Back in 2012, James Gorman, then as now the chief executive of Morgan Stanley, bluntly told employees unhappy with the prospect of smaller paychecks: “If you’re really unhappy, just leave. Life’s too short.”

I suspect Gorman could say the same thing today. JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup are all cutting banking jobs, as is my old firm, Lazard. Even William Blair, the Chicago-based boutique investment bank, is reducing headcount. And European banks by and large are still trying to recover from the 2008 financial crisis.

All hope is not lost. There are big paychecks still to be had in some corners of the Wall Street investment banks, explains Gary Goldstein, chief executive of Whitney Group, a longtime Wall Street recruiter. “It’s all about relationships now,” he tells me.

The bankers getting paid the most on Wall Street these days — as much as $5mn a year, or more — are those responsible for maintaining and nurturing the relationships with the big alternative asset management groups, such as Blackstone, KKR and Apollo, which are collectively the biggest fee payers to Wall Street. Or the bankers working with the buyout groups on leveraged finance deals. “The guys that have real deep sponsor relationships are still getting paid well,” Goldstein says, agreeing that the execution-oriented investment bankers are no longer at the top of the Wall Street heap.

Still, the very best M&A bankers — those that combine execution skills and enduring relationships — can be paid extremely well, although they may have to leave Goldman or Morgan Stanley and head to successful M&A boutiques such as Centerview Partners, Evercore, Moelis & Co, PJT Partners, Guggenheim Partners and Perella Weinberg Partners. Here, profit margins are still high and the risks of capital losses are low, or non-existent.

Of course, the new Kings of Wall Street are not the Wall Street banks, big or small. That title belongs, rightly, to the Blackstones and the Apollos of the world. These groups — growing rapidly, lightly regulated, nimble and diversified — are where the really big money on Wall Street can still be made. At last check, Steve Schwarzman, the co-founder of Blackstone was worth about $30bn. It is no wonder then that the best and the brightest on Wall Street are flocking to work with him.

>>> US Close Dow -0,03% S&P -0,16% Nasdaq -0,35% Russell -0,22%

Closing Stock Market Summary

The stock market started the day on a more upbeat note. For most of the session, though, index level price action was negative. There was a late afternoon bounce after the S&P 500 briefly slipped below the 4,100 level, leaving the major indices with only modest losses on a lightly traded day. 

Mega cap stocks had been supporting the broader market for most of the week, yet money flows reversed somewhat today. The Vanguard Mega Cap Growth ETF (MGK) fell 0.3% while the Invesco S&P 500 Equal Weight ETF (RSP) closed flat and the market-cap weighted S&P 500 fell 0.2%.

There was not a lot of conviction on either side of the tape today. This followed news that the scheduled meeting between President Biden and congressional leaders to discuss the debt ceiling on Friday had been postponed until early next week as staff members continue to negotiate. Also, it followed a preliminary University of Michigan Consumer Sentiment Survey for May that featured a drop in sentiment and an increase in five-year ahead inflation expectations to 3.2% from 3.0%. That is the highest reading since 2011.

Market breadth showed somewhat mixed action under the index surface. Decliners had only a slim lead over advancers at both the NYSE and the Nasdaq.

S&P 500 sector performance was also mixed with many of the sectors closing near their flat lines. The consumer discretionary (-0.9%) sector was the worst performer due to losses in Amazon.com (AMZN 110.26, -1.92, -1.7%) and Tesla (TSLA 167.98, -4.10, -2.4%). Meanwhile, lingering growth concerns led to the relative outperformance of the defensive-oriented utilities (+0.4%) and consumer staples (+0.3%) sectors. 

Regional bank stocks remained in focus today. The SPDR S&P Regional Banking ETF (KRE) had a rollercoaster day. It was up as much as 1.1% and down as much as 1.1%, but ended the session on an upswing with a 0.6% gain.

Treasury yields turned higher in response to five-year ahead inflation expectations rising. The 2-yr note yield, at 3.91% shortly before the release, settled up seven basis points to 3.98%. The 10-yr note yield, at 3.38% shortly before the release, settled the session up seven basis points to 3.46%.

  • Nasdaq Composite: +17.4% YTD
  • S&P 500: +7.4% YTD
  • Dow Jones Industrial Average: +0.5% YTD
  • S&P Midcap 400: +0.1% YTD
  • Russell 2000: -1.2% YTD

Reviewing today's economic data:

  • April Import Prices 0.4%; Prior was revised to -0.8% from -0.6%
  • April Import Prices ex-oil 0.0%; Prior -0.5%
  • April Export Prices 0.2%; Prior was revised to -0.6% from -0.3%
  • April Export Prices ex-ag. 0.2%; Prior was revised to -0.5% from -0.2%
    • The key takeaway from the report is that it follows suit with the April CPI and PPI reports from earlier in the week, which showed a moderation in inflation pressures on a year-over-year basis.
  • May Univ. of Michigan Consumer Sentiment - Prelim 57.7 (consensus 62.9); Prior 63.5
    • The key takeaway from the report is that consumer sentiment has weakened amid concerns about the economic outlook, which threatens to curtail discretionary spending activity that, in turn, would weigh on growth.

Looking ahead to Monday, market participants will receive the following economic data:

  • 8:30 a.m. ET: Empire State Manufacturing for May (prior 10.8)
  • 4:00 p.m. ET: Net Long-Term TIC Flows for March (prior $71.0 billion)

Barrons : How Elon Musk Could Solve His Tesla-Twitter Puzzle

How Elon Musk Could Solve His Tesla-Twitter Puzzle
A Starlink IPO could raise billions of dollars and mean less selling of Tesla in the years ahead.

SpaceX is the most valuable space company in the world—and it might offer Elon Musk the key to unlocking his empire.

It’s hard to feel pity for the world’s second-richest person. Musk is estimated to be worth about $180 billion, the combined value of his stakes in Tesla TSLA -2.38% (ticker: TSLA), SpaceX, Neuralink, the Boring Co., and Twitter, among other investments. The problem, though, is that all but Tesla are privately held, and therefore illiquid. When Musk needs money, his only option is to sell Tesla stock. That was the case from April to December 2022, when Musk was forced to sell some $23 billion in Tesla shares to keep Twitter afloat, one of the reasons the stock tumbled more than 50% during that period. What Musk really needs is another publicly traded company that would allow him to unlock some of his wealth—and take the pressure off Tesla.

And that’s where SpaceX comes in. To call the company wildly successful would be an understatement. SpaceX has been sending astronauts to the International Space Station and surrounding the Earth with its Starlink satellites, and has even revived the U.S.’s moribund space program and restored it to global launch dominance. Its businesses are starting to make money, too. Each launch could bring in from $150 million to $300 million in sales, and Starlink was sporting one million subscribers at the end of 2022. An initial public offering isn’t out of the question, and it might be just what Musk and Tesla shareholders need.

“I am confused [as] to why the board of directors allowed Elon to crash Tesla’s stock price,” says Leo Koguan, Tesla’s third-largest individual investor behind Musk and Larry Ellison. “Why not sell shares of SpaceX?”

Why not, indeed. Don’t let the recent explosion of SpaceX’s Starship fool you—SpaceX is light-years ahead of the competition. Right now, the focus is on its Starship launch system, the largest ever built, with more than double the payload capacity of the National Aeronautics and Space Administration’s Space Launch System, or SLS, which is part of the Artemis program to return U.S. astronauts to the moon. Starship is the first system designed to be fully reusable, moving beyond the current SpaceX system, where only the lower stage gets reused. Success would mean larger payloads and lower costs, making Starlink and other space-based businesses more competitive.

“We believe that a successful orbital launch of SpaceX’s Starship vehicle could be the most important event in the formation of the space economy since Sputnik launched in 1957,” notes Credit Suisse analyst Scott Deuschle, adding that a combination of size, reusability, and ease of manufacturing could drop the cost of reaching a low Earth orbit by a factor of 30.

The first integrated test with both halves of the unmanned Starship ended with a “rapid, unscheduled disassembly” event, SpaceX lingo for when something blows up. But failure isn’t a bad thing. SpaceX has launched more than 220 rockets in its 21-year history, and blown up several of them before the technology to reuse rockets was mastered. The reusability and development strategy is far different from the strategy used by United Launch Alliance, jointly owned by Boeing BA -0.56% (BA) and Lockheed Martin (LMT), which aims for perfection, adding costs and slowing development. The traditional space industry still doesn’t reuse rockets, and the United Launch Alliance still primarily serves the U.S. government.

The strategy of actively courting failure has worked for SpaceX. Over its life, SpaceX has spent something in the range of $10 billion, and it has a constellation of roughly 4,000 satellites, reusable spacecraft, reusable rockets, and its own launch complex in Boca Chica, Texas, to show for it. NASA, on the other hand, has spent more than $20 billion and 11 years developing SLS, which started around the time that the famously expensive Space Shuttle was mothballed. SLS is more powerful than the rocket that took the first astronauts to the moon, but it has had just one launch since starting development in 2011. SpaceX launched 61 rockets in 2022.

“SpaceX showed that failing and trying again was far cheaper and more effective than traditional space development,” says Hélène Huby, co-founder of the Exploration Co., which is working on reusable spacecraft.

The upstarts are having trouble keeping up. Richard Branson’s Virgin Orbit Holdings (VORBQ), a satellite launch company, filed for bankruptcy in April, and shares of Virgin Galactic Holdings SPCE -1.23% (SPCE), his space travel company, have tumbled 92% since peaking in February 2021. Companies such as Momentus (MNTS), Astra Space (ASTR), and Spire Global (SPIR), which came public via special purpose acquisition companies in 2021, all trade for less than $1 a share. Even Amazon.com AMZN -1.71%(AMZN) founder Jeff Bezos’ Blue Origin, founded in 2000 with the motto gradatim ferociter—Latin for “step by step, ferociously”—hasn’t conducted an orbital flight. Blue Origin was also late delivering engines to United Launch Alliance, and the Vulcan rocket they will be used on has yet to make an orbital flight. The company doesn’t act with the same sense of urgency as SpaceX, multiple industry professionals tell Barron’s.

Blue Origin points out that it has conducted 23 launches of its New Shepard fully reusable vehicle that has carried more than 100 payloads and 31 people to space. And while it may be lagging behind SpaceX, there is room for more than one player, says Micah Walter-Range, co-founder of space consulting firm Caelus Partners. “Governments like to avoid monopolies,” he says.

It isn’t all about launches. Starlink, SpaceX’s space-based Wi-Fi business, has thousands of satellites orbiting the Earth, providing high-speed internet service for about $110 a month. The scale and growth of Starlink have the business on pace to generate sales of about $1.8 billion in 2023, double that of 2022. And of all Musk’s privately held businesses, Starlink is the one that looks most ready to stand on its own. Even Musk acknowledged as much in 2021, when he said that he might take Starlink public when cash flows are predictable—and cash flow now appears to be getting predictable.

Whether Musk should IPO Starlink comes down to how much it would fetch from investors. The private markets aren’t much help. Though SpaceX was valued at $137 billion in its last funding round, its shares haven’t been changing hands on platforms that specialize in facilitating private transactions as frequently. Rainmaker Securities, for instance, has traded more than $4 billion in SpaceX stock in transactions stretching back more than five years. Rainmaker CEO Glen Anderson has seen a troubling trend in shares recently—they aren’t trading. “Six months ago, if we got a SpaceX block, it sold in two, three days,” he says. “Now, we’ve had SpaceX blocks on the books for two months.”


It’s tough to know exactly why that’s the case. The easiest thing to point to is the market. The Nasdaq Composite COMP -0.35% is off more than 20% from its peak, as the Federal Reserve has raised interest rates in an attempt to lower inflation. Rising rates tend to hit richly valued stocks harder than most. SpaceX might not be publicly traded, but it is a growth company, and even private-market valuations aren’t immune to the Fed.

That makes figuring out how much Starlink would be worth in an IPO even more difficult. At about $140 billion, SpaceX is worth less than Boeing’s value of roughly $170 billion, including debt and equity. It’s a lofty valuation, even for a company that has perfected reusable rockets, driven down the cost of reaching space, restored America’s space-launch leadership lost to China, ferried NASA astronauts to the International Space Station, and started a space-based Wi-Fi business that now has an estimated 1.2 million subscribers.

Comparables to Starlink are hard to find. There’s HughesNet, which is owned by EchoStar (SATS) and has 1.2 million Wi-Fi subscribers. The entire EchoStar business, which also includes satellite services sold to news organizations and the government, is valued at $1.3 billion, and the stock trades for about 23 times estimated 2023 earnings. HughesNet isn’t growing, though—a big difference from SpaceX, which wouldn’t be worth $140 billion if Starlink subscribers were hitting a peak.

Verizon Communications (VZ) might be a better comparison. The company, which has 143 million subscribers, is valued at $335 billion including debt and equity, or roughly $2,300 a subscriber. By that math, Starlink needs to get to 50 million or 60 million subscribers to justify the total SpaceX valuation. Even that is an imperfect comparison, however, because it doesn’t consider the cost of building out the Starlink network, how profitable Starlink could become, or if the company will be able to substantially lower the cost of providing high-speed internet.

Despite the uncertainty, Starlink is the business that investors are most likely to be able to purchase sooner rather than later. SpaceX is planning to build a constellation of roughly 30,000 satellites to offer its Wi-Fi service, which could take up to $10 billion just to build based on estimates of current pricing, and a capital raise seems likely. SpaceX hasn’t responded to multiple requests for comment. An IPO, even at a valuation of $70 billion—assuming Starlink is worth half of SpaceX’s total value—would help Starlink raise that money without having to go to another round of private funding.

It would also allow Musk, who owns an estimated 42% of SpaceX, to free up some $30 billion and give him another company’s shares to sell when it’s time to pay taxes or buy a social-media platform. For Tesla shareholders, that would be a successful IPO, no matter the valuation