5e95d8c9c584f93e2594fb24 Mars City

Tesla, SpaceX, and the Best Hotels on Mars

To have even the slightest appearance of comparing the performance of a publicly traded company to the potential lucrativeness of a related pre-IPO company available at Iron Edge VC can be a dicey proposition. We’ve brushed up against this situation a couple of times with the plant-based meat industry; the temptation is too hard to resist. Still, when we see that the erratic but mostly bullish performance of Beyond Meat is grabbing headlines the way a chubby kid grabs candy after smashing a pinata, we are inspired to tell you all about the rapidly growing imitation meat industry and our ability to provide access to the privately held Impossible Foods. When we go down this road, though, we are careful to emphasize that Beyond and Impossible are two entirely separate companies, and their fates are not intertwined. Even though their fundamental missions are quite similar, their bottom lines are affected more substantially by things like corporate management, marketing effectiveness, and the behavior of shareholders. We assert with clarity that Beyond Meat’s performance on the NASDAQ is not in itself a reliable indication of how Impossible Foods’s numbers might look. Aside from maintaining the high level of integrity we put forth for our clients, this practice has also spared us from embarrassment during the heart stopping plunges that Beyond stock experiences from time to time.

Now that we have gotten that out of the way, have ya gotten a load of what Tesla Motors stock (Nasdaq: TSLA) has been up to lately? Last week, the electric car manufacturer reported earnings of $386 million for the fourth quarter of 2019, decisively exceeding analyst estimates. They also took the opportunity to announce that the production of the hotly anticipated Model Y, a compact electric automobile with a price tag that’s much more approachable than that of its predecessors, is ahead of schedule. An individual purchasing the Model Y could quite easily pay for the entire car with the money saved by not buying gasoline for ten years. Sales of this car are expected to be vigorous, and investors took note: within four trading days after the announcements, TSLA rose an astounding 65%. Granted, the stock pulled back about 17% from that point yesterday when the coronavirus threw a potential monkey wrench into the Model Y’s timeline, and part of the stock’s surge could well have been attributed to short covering. Still, CNBC’s Jim Cramer has good things to say about Tesla’s future, and most sane people wish they had loaded up on this one before earnings. TSLA has been up since this morning’s opening bell, rendering yesterday’s action an untroublesome hiccup.

Iron Edge VC is not in the business of peddling Tesla or any other public issue, so at this juncture we will trot out the disclaimer that Tesla’s performance has no direct link to the SpaceX shares to which we do provide access. Nonetheless, an obvious connection remains unavoidable. Elon Musk is the founder (or technically a co-founder in Tesla’s case) and CEO of both of these enterprises. Who is Elon Musk? Basically, he’s the real-life Tony Stark of Iron Man fame. Stop rolling your eyes; the comparison is legitimate. Love him or hate him, Musk is like Stark in that he is a hyper-intelligent entrepreneur who invents things that are way beyond the average person’s imagination. He is a free thinker whose antics have occasionally gotten him into hot water with regulators and investors alike, but he’s much too rich to have even the slightest concern about such things. And, like Tony Stark, Elon Musk flies around in a bulletproof suit and blows away terrorists with the machine guns that are integrated into the armor. Well, okay, that last one might not be true, but don’t rule it out from happening one day.

The point we’d like to illuminate is that Tesla Motor Company and Space Exploration Technologies Corp. share a very special pedigree. They are both the brainchildren of one of the world’s most innovative thinkers. Musk has the tendency to set seemingly unrealistic goals and then live up to his word. Observers scoffed at his prediction that Tesla would sell 350,000 cars in 2019, but he promptly applied egg to those faces when he exceeded the projection. When Musk’s SpaceX wanted to scale out their wildly profitable Starlink communication satellite program by appealing to the FCC for permission to launch 12,000 units, many believed that the request would be rejected, but again the naysayers were proven wrong. Now, SpaceX hopes to increase the program further, to 30,000 satellites, and they are likely to succeed on that measure as well. SpaceX’s domination of the international communications spectrum will yield nearly incomprehensible levels of revenue, but we’re not going into that part of the company’s operations today. If you wish to learn more about the satellite launches, review Iron Edge’s newsletter SpaceX: Let’s Do Launch (November 14, 2019).

Elon Musk also founded The Boring Company. The name of this business is perhaps the result of Musk’s sense of humor. The company isn’t known for inducing boredom, but it does endeavor to bore holes. More than that, Boring digs tunnels. They dig very long tunnels, and they dig them with speed and efficiency. The concept is Musk’s answer to many futurists’ dreams of flying cars. From Boring’s website: “Unlike flying cars, tunnels are weatherproof, out of sight and won’t fall on your head. A large network of tunnels many levels deep would help alleviate congestion in any city, no matter how large it grew (just keep adding levels)”. The initial goal of the project is to alleviate “soul crushing” traffic jams, but there are other tasks in store for the borers. They are expected to provide the tubes through which Virgin Hyperloop One’s transportation pods will travel at speeds of up to 760 miles per hour. Musk has also made plans to use The Boring Company to construct a network of pathways beneath the surface of Mars.

Of course, the haters are gearing up for their loudest chorus yet. They might regret their skepticism about the volume of Tesla production and about the success of SpaceX’s satellite launches, but this one is a doozy. We admit, it does sound far-fetched, but we’ve learned that Musk’s outlandish ambitions have a way of coming true. Another mitigating factor comes to light when we remember that Musk has the uncanny ability to recruit the crème de la crème of the engineering community and then get them to outdo themselves on a regular basis. Furthermore, he has given himself until 2050 to accomplish his Martian population plan.

You might counter that we are almost as close to 2050 as we are to 1990, but thirty years is actually a lot of time for people like Elon Musk and his vast team of innovators. You might also assert that a trip to Mars went very, very poorly for Arnold Schwarzenegger in Total Recall (click here for a graphic depiction; viewer discretion is advised). These arguments aside, Musk has thrown down the gauntlet and boldly asserted that by his self-imposed deadline, he will have constructed the extraterrestrial metropolis with about a million human beings calling it home.

SpaceX currently employs its fleet of Falcon 9 rockets to deploy the communications satellites we discussed earlier. The Falcon 9s are the result of increasingly more efficient, more reusable, and less expensive rockets: through repetition, trial, and the occasional error, SpaceX has grown remarkably proficient at setting lofty goals in space travel technology, surpassing those goals, and then challenging themselves even further. Their seemingly limitless capital reserves and unmatched intellectual resources nurture an astounding ability to accomplish unimaginable advances. For the transportation of earthlings to Mars, SpaceX is developing the Starship system, which will consist of 1,000 crafts that are suited for deep-space travel. The Starship units will be reusable, naturally, and they will provide seating for 100 passengers. Musk’s intention is to schedule three daily flights when Starship is ready for action. If all goes according to plan, you can assume that Starbucks and McDonald’s will be looking into opening their very first interplanetary locations.

You may find all of this to be difficult to swallow, and we must acknowledge that it has the appearances of science fiction unattainable in reality. On second thought, though, many before us have bet against the real-life Tony Stark by shorting TSLA stock and paid dearly for that misguided move.

We at Iron Edge VC are proud to have access to privately held SpaceX shares. If you would like to learn more, or if you know of anybody else who would, please do not hesitate to contact us by clicking “Get in Touch” below.

As always, shares are available on a first come, first served basis.

5f6e0d464e388c4975685025 Paul Min

Paul Maguire

Founder And Managing Partner