This isn’t the first time SpaceX has faced bankruptcy

If SpaceX is really considering potential bankruptcy, at least this wouldn’t be the first time.

On Tuesday, CNBC obtained a copy of a letter that SpaceX CEO Elon Musk sent to his employees the day after Thanksgiving, in which the billionaire said the rocket company could be at “real risk of bankruptcy.” , unless she can ramp up production of the Raptor Engines that power her Starship rockets.

Each rocket flight could require up to 39 Raptor engines. “We face a real risk on how to file bankruptcy if we cannot achieve a Starship theft rate of at least once every two weeks next year, Musk wrote. “We need everyone on the bridge to recover from what is, frankly, a disaster.”

On Tuesday, Musk responded to a tweet about his comments with additional context, noting that SpaceX’s bankruptcy, while “unlikely,” is also “not impossible,” especially if the global economy experiences a downturn before the company can get its Starship program up and running. Musk also pointed to auto giants like General Motors and Chrysler, which both filed for bankruptcy during the Great Recession in 2009, and he included a quote from former Intel CEO Andrew Grove: “Only paranoid survive, ”which was Grove’s famous slogan.

This isn’t SpaceX’s first contact with serious financial risk: Musk has often talked about how risky it was to launch the company in 2002, and how it nearly failed a few years later. Last year, Musk tweeted that “in the early days” of launching both Tesla and SpaceX, he had very little faith in the success of either of these companies.

“I thought there was> 90% chance that SpaceX and Tesla are worth $ 0,” he wrote.

In 2013, Musk was talking during a Google for Startups event about how SpaceX nearly went down after its first three rocket launch attempts failed between 2006 and 2008. The problem was simple: It had invested around $ 100 million of its own money to found SpaceX, which covered only three attempts to launch a rocket into orbit.

The first three attempts failed – the first due to fire, while the next two simply failed to reach orbit. “I was like ‘OK, we can afford three launches.’ And then the third one failed, ”Musk said. “It was a very, very painful exercise. We were just too stupid to know how to put a rocket into orbit.”

Instead of shutting down the company, Musk said, he invested more of his own money – barely enough for a fourth launch. In a 2017 speech at the International Astronautical Congress (IAC) conference in Adelaide, Australia, Musk noted that if the fourth launch failed, SpaceX would have shut down permanently.

“That would have been it for SpaceX,” Musk said. “But fate loved us that day.”

This is because the fourth launch was successful, apparently because the engineers changed a single line of code to fix a problem on the third attempt. The success helped SpaceX land a commercial contract with NASA worth around $ 1.6 billion, making the young company a lifeline.

Today, SpaceX isn’t that young – and last month it hit a valuation of $ 100 billion, making it hard to believe the company could really face bankruptcy again. In October, a Morgan Stanley survey found that a majority of “institutional investors and industry experts” believe SpaceX could eventually become more valuable than Tesla, which currently has a market value of over $ 1. $ 1 trillion.

It’s always possible that Musk is using the threat of bankruptcy as a motivational tactic for his employees. But as CNBC noted on Tuesday, Raptor engines are critical to SpaceX’s financial future, as the company will need its Starship rockets to launch its next generation of Starlink satellites into orbit.

It’s the kind of risk that propelled Musk to his current status as the richest person in the world, with an estimated net worth of $ 310 billion, according to Bloomberg.

“If you were to estimate the risk-adjusted rate of return on various industry opportunities, I would put rocket building and [electric] cars pretty close to the bottom of the list, ”Musk told a South by Southwest panel in 2018.“ They should be the dumbest things to do. ”

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