SpaceX's investment-grade bond rating stirs controversy as investors pile in

Elon Musk's SpaceX is returning to the bond market just 10 days after its record-breaking initial public offering, stoking controversy over what critics call overly generous credit ratings from the major agencies.

Moody's assigned SpaceX corporate bonds a Baa1 rating on June 18 (local time), Bloomberg reported Tuesday. Baa1 is the eighth-highest investment-grade rating on Moody's 10-tier scale — running from Aaa to Baa3 — and sits just two notches above junk territory.

That puts SpaceX on par with large, stable consumer companies such as Starbucks and Lowe's, and two notches above Musk's other company, Tesla, which holds a Baa3 rating.

S&P assigned SpaceX a BBB rating, one notch below Moody's, while Fitch matched Moody's level with a BBB+ rating, according to other media reports.

The controversy centers on SpaceX's financial profile, which looks nothing like those of its rating peers. When Moody's first assigned Nvidia a Baa1 rating roughly a decade ago, the chipmaker had been publicly listed for 16 years and was generating more than $1 billion in free cash flow.

SpaceX, by contrast, has limited publicly available financial statements and is running a "sustained free cash flow deficit." S&P projects the company will remain cash-flow negative through 2030, with debt potentially swelling to $132 billion (about 202.8 trillion won) by 2028. Given that its net debt is currently near zero, that would represent a surge of hundreds of trillions of won in liabilities in just over two years.

"From an equity perspective, it's a remarkable opportunity over the next 10 to 20 years," said Sal Naro, chief investment officer at Coherence Credit Strategies. "But from a bond perspective, the rating agencies seem to be giving a lot of discretion and a positive view on what's going to happen in the near to medium term."

Despite those concerns, investor demand is surging for SpaceX's debut corporate bond offering — worth $20 billion (about 30.7 trillion won) — which could price as early as Tuesday.

The primary use of proceeds is to repay a bridge loan SpaceX drew in March to refinance debt at social media platform X and xAI, with the remainder earmarked for business expansion spanning reusable rockets, the Starlink satellite network, AI and space-based data centers. Early guidance puts the yield on the 10-year tranche at roughly 130 to 135 basis points above the benchmark rate.

Investors are drawn to the offering by SpaceX's unrivaled business position.

Moody's cited SpaceX's role as the world's largest launch provider — responsible for more than 80 percent of global orbital launch mass since 2023 — and its operation of the Starlink low-earth-orbit satellite network as the basis for the rating. Starlink had about 12 million subscribers as of June 4.

Ross Pamphilon, chief investment officer for fixed income at Impax Asset Management, said he was considering buying the bonds but described the structure as "a powerful satellite business in Starlink attached to a cash-burning AI operation in xAI." He added that while the vision — encompassing space-based data centers and a global communications network — was compelling, it required "a leap of faith."

John Lloyd, a portfolio manager at Janus Henderson Investors, was more optimistic. "A significant portion of the near-term capital expenditure is going into things that will generate returns fairly quickly," he said. "If Musk achieves 75 percent of his goals, the credit rating goes up and it could start to look like one of the hyperscalers."