Elon Musk’s SpaceX is preparing to issue $20 billion in bonds, marking a noteworthy development as the company navigates capital markets despite ongoing losses. The planned debt offering follows similar sizable bond issuances from major technology firms like Alphabet and Meta Platforms. However, unlike these profitable, software-centric companies, SpaceX has reported an annual loss of approximately $9 billion.

Credit rating agencies S&P Global Ratings, Moody’s, and Fitch have assigned SpaceX investment-grade ratings within the BBB category, a designation that typically reflects moderate credit risk. This rating is unusual given SpaceX’s lack of profitability, but the company’s minimal existing debt and substantial cash reserves — estimated at $101 billion following a recent initial public offering — may have influenced the assessments. Some market participants suggest that agencies and index providers like Nasdaq may be adjusting conventional standards to reflect the unique attributes and high valuation of SpaceX, which stands around $2 trillion despite trailing revenues of about $20 billion.

Investor perspectives on the risk associated with SpaceX bonds are expected to vary. Bond yields and trading prices will ultimately signal market views on the company’s financial outlook. Credit ratings also play a significant role, as certain institutional investors, including insurance companies, often rely on such ratings to determine eligibility for purchase, with higher-rated bonds being more accessible to conservative buyers.

A key factor supporting SpaceX’s perceived creditworthiness is its satellite telecommunications division, Starlink, which reportedly generates positive earnings before interest, taxes, depreciation, and amortization (EBITDA) of roughly $8 billion annually. However, the division requires ongoing capital investment, suggesting additional financing needs in the future. Meanwhile, other business segments within SpaceX, such as those focused on space exploration and artificial intelligence, remain smaller, speculative, and capital-intensive.

Analysts note that issuing bonds may not be the optimal strategy for SpaceX’s broader financing requirements. The company’s high valuation relative to revenue implies that equity sales could be a preferable option. Nevertheless, bond financing could prove more cost-effective compared to prior bridge loans SpaceX secured, which were connected to Musk’s acquisition of Twitter and came with higher interest rates.

SpaceX’s decision to tap the bond market reflects confidence in its standing with investors and rating agencies, who have shown a willingness to adapt traditional frameworks for a company combining extraordinary market value with unconventional business risks. Yet, industry observers caution that shifts in market sentiment could challenge the sustainability of these financing conditions.