Elon Musk is on track to become a trillionaire, outpacing Wall Street.

Today on Decoder, I’m chatting with Ryan Mac, a tech reporter and coauthor of the insightful book *Character Limit: How Elon Musk Destroyed Twitter*, released in 2024. It’s a must-read for anyone interested in the intersection of technology and social media.

I invited Ryan to discuss the upcoming SpaceX IPO, which is set to be one of the most significant public offerings in history. With a staggering valuation nearing $2 trillion, this IPO is not just about size; it also raises questions about the integrity of market regulations that seem to be bending, if not breaking, in the process. Additionally, we’ll touch on X, the social platform formerly known as Twitter, which Musk acquired in 2022—a topic Ryan explored in his book.

Back when Musk bought Twitter, I was convinced he would regret the decision. I penned an article titled “Welcome to Hell, Elon,” which became one of my most-read pieces. My argument was that without effective moderation, Twitter couldn’t grow its user base or revenue, and that Musk’s acquisition would tarnish his reputation and harm his other ventures.

Now, with the SpaceX IPO filing numbers in hand, we can assess the accuracy of that prediction. X is declining across all major metrics, but as Ryan points out, that might not matter. We dive into the rules being circumvented to facilitate the SpaceX IPO—rules regarding shareholder control, inclusion in major index funds, and the usual checks and balances that keep companies accountable. You’ll hear us mention “corporate governance” frequently in this episode, and while it may sound dry, it’s crucial to understanding the implications.

Consider the fact that Musk has amassed incredible wealth and power, seemingly detached from accountability, with major investors hesitant to voice concerns for fear of missing out on what could be a monumental financial opportunity. There’s a lot to unpack in this discussion.

So, let’s get into it: Ryan Mac, on Elon Musk, X, and the SpaceX IPO.

This interview has been lightly edited for length and clarity.

Ryan Mac, welcome to Decoder!

Thanks for having me. I’m excited to be here. I can’t believe it’s taken this long for us to connect on the show!

I know, right? It’s great to finally have you on. I’ve been following your work closely, and I appreciate you joining us.

I appreciate that! It’s good to be here. I’ve listened to many episodes, so it’s nice to finally participate.

Let’s dive into the SpaceX IPO. Musk has filed to take SpaceX public, and there’s a lot to unpack, including the claim of a $28 trillion addressable market for SpaceX services—an astonishing figure.

You’ve covered a lot of this, so I want to start with X, the everything app, formerly Twitter. The SpaceX S-1 gives us our first real insight into what X has become and where it’s headed.

In 2022, I wrote an article that went viral, titled “Welcome to Hell, Elon,” where I confidently predicted that buying Twitter would be a disaster for him. I want to share my thesis from that piece and see if you think it holds up. I stated that “Twitter is a disaster clown car company that is successful despite itself, and there’s no way to grow users and revenue without making enormous compromises that will ultimately damage Musk’s reputation and his other companies.”

Some might argue that this prediction has come true, while others might say Musk is more powerful than ever, on the brink of a trillion-dollar IPO. What’s your take on X since Musk’s acquisition, and what do the financials in the S-1 reveal?

To start, X is not growing. It’s stagnated in revenue and user growth. It’s been absorbed into Musk’s other ventures—first xAI and now SpaceX—making it somewhat of an afterthought, despite Musk’s personal attachment to it. He spends a lot of time on the platform, but as a business, it pales in comparison to other parts of his empire, like Starlink.

When Musk bought Twitter, he pitched grand ideas to investors, claiming he would reach a billion users and create an all-in-one app akin to WeChat. However, none of that has materialized. Despite this, Musk’s wealth has skyrocketed since the acquisition, from around $300 billion to fluctuating between $600 and $800 billion today. The upcoming SpaceX IPO could push him past the trillion-dollar mark, which is a bizarre contradiction.

Did he simply buy a platform to amplify his own tweets, manipulate the algorithm to favor himself, and disregard the fact that revenue has plummeted by $100 million year over year, now at less than 40% of pre-acquisition levels?

From a business perspective, X has failed by every metric. The only revenue increase comes from data licensing to AI companies. Musk’s own AI venture, xAI, has been merged with X, which has further buried its potential. While X is a failure as a standalone business, Musk has managed to raise billions for xAI and integrate it into SpaceX, which complicates the narrative.

You could argue that the billions lost on Twitter were worth it if they lead to a trillion-dollar SpaceX IPO. However, I caution against viewing this as a long-term strategy. There were rumors that Musk bought X to influence the 2024 election, but our reporting found no evidence to support that. Regardless, he has effectively turned X into a platform for his own messaging, controlling the narrative and boosting his visibility.

In the past, Musk claimed he didn’t need to market Tesla because he could use Twitter to drive sales. He had a direct line to consumers, which created immense demand for models like the Model 3. However, my thesis also suggested that his political engagement and algorithm changes would harm his reputation and his companies. We’ve seen some evidence of this with Tesla, where popularity has waned, but does the same hold true for SpaceX?

That’s a great question. With Tesla, we’ve seen protests and a decline in market share, partly due to competition from companies like BYD. However, SpaceX seems to have avoided similar reputational damage, likely because its clients are primarily governments and large corporations, not everyday consumers. They have a monopoly on launches, so if you need to get something into space, you’ll likely choose SpaceX, regardless of Musk’s reputation.

Starlink, in particular, is a strong product that has gained traction, especially in critical situations like the ongoing conflict in Ukraine. It’s hard to argue against using Starlink when alternatives are lacking. The audience recognizes its value, even if there are criticisms of Musk’s behavior on X.

You’re suggesting that where there are no market alternatives, reputational issues don’t impact SpaceX, while in consumer markets, like X, those issues have driven users away. X has several competitors, and many users have left the platform. Threads has gained traction, but it lacks the same influence. Why hasn’t that influence translated elsewhere, and why do users remain on X?

That’s something I ponder often. The rumors of X’s demise have been exaggerated. Social platforms are sticky; they’ve built a dedicated user base over the years. Even during layoffs, when Twitter went down temporarily, people were quick to write it off, but it’s proven resilient. Many users stay because their communities are there, whether for sports or movies. Despite the controversies, they continue to engage because it’s where they’ve built their online lives.

As we approach the IPO, will X’s importance to Musk increase or decrease? It’s his favorite platform, but running a public rocket company comes with different priorities.

It’s hard to say. Musk doesn’t always operate as expected. His history with Tesla and Twitter has shown that his social media presence can lead to legal issues. He’s more powerful and wealthier than ever, so I doubt the IPO will change his behavior on X. Recently, he contradicted information in the SpaceX S-1, which is a violation of quiet period rules, but I doubt he’ll face consequences. He seems to operate above accountability.

This brings us back to the SpaceX IPO itself, which appears structured to bypass traditional accountability mechanisms. It’s set to be listed on the NASDAQ, potentially making it accessible to a wide range of investors, including those in index funds. Musk will maintain significant control, raising questions about the role of a board of directors and the lack of market alternatives for accountability.

Let’s break down the structure of this IPO. You’ve highlighted that it poses a corporate governance nightmare for those who care about such issues. Can you explain?

Absolutely. Musk’s super-voting shares give him about 85% control over company votes, far exceeding the control of other CEOs like Mark Zuckerberg. This means he can dictate corporate decisions, appoint board members, and structure his own compensation packages. For instance, he received a massive pay package tied to ambitious milestones, like establishing a colony on Mars, yet he can vote on these shares even before achieving those goals.

Can we talk about the Mars colony? It sounds outrageous, right?

It is! Musk’s pay package is contingent on achieving these lofty goals, yet he can vote on the shares regardless. This raises eyebrows among corporate governance experts, who are appalled that he can leverage these shares without meeting the milestones. It seems like a way for him to maintain a narrative that he’s working toward these goals while still benefiting from the shares.

Additionally, he doesn’t pay taxes on these shares until he earns them, which means he can hold onto them without immediate financial repercussions. This setup allows him to wield power without accountability.

In a typical market, shareholders could push back against such practices, but this IPO is likely to end up in index funds, which raises concerns among corporate governance experts. How will this affect everyday investors?

This is a critical point. Many people may not actively choose to invest in SpaceX, but if they have retirement accounts or investments in index funds, they could end up owning shares without realizing it. SpaceX has worked with indices to relax rules, allowing it to enter the NASDAQ-100 much sooner than usual, which will compel index funds to buy shares, providing SpaceX with significant capital.

How did this happen? Did Musk negotiate directly with index fund managers, or was it more opaque?

It’s been somewhat unclear, but there have been announcements regarding relaxed profitability and governance rules. The hype surrounding SpaceX has created a fear of missing out among investors, leading to a herd mentality. One fund manager even admitted that missing out on the IPO would raise questions about their decision-making, while getting burned would be less scrutinized if others were also affected.

This dynamic erases the usual market corrections where some investors bet against the company. I’m curious to see the short interest in SpaceX stock once it’s public.

Given Musk’s track record, especially with Tesla, he has a history of outpacing short sellers. The meme-ification of his ventures adds another layer to this IPO, as it’s not just a stock but a cultural phenomenon driven by Musk’s celebrity status.

It’s fascinating because while car sales for Tesla are declining and older models are being phased out, Musk continues to promise groundbreaking innovations. Can he replicate this with SpaceX, continually selling grand visions to maintain investor interest?

He’s already doing that. Earlier this year, SpaceX was focused on its launch business and Starlink, but Musk introduced ambitious plans for data centers in space and a Mars colony. These new goals have emerged recently, similar to how he pivoted Tesla toward robotics and other futuristic concepts.

It’s interesting to note the contradictions in Musk’s messaging. He previously downplayed lunar missions but has recently shifted focus to the Moon due to renewed interest and funding from NASA. His adaptability has allowed him to maintain investor confidence.

As we wrap up our discussion on the SpaceX IPO, it’s clear that the fundamentals of the business are secondary to the hype surrounding it. Starlink is the only profitable segment, generating $11.4 billion last year, while other divisions are losing money. How does SpaceX plan to sustain its operations with such a disparity?

SpaceX believes Starlink can continue to grow, targeting untapped markets like India. However, competing against established telecom providers in those regions is challenging. The revenue per user may not match that of the U.S. market, but they’re optimistic about expanding their user base.

That said, the Indian market is well-served by local providers, making it difficult for Starlink to gain traction. Have they presented a solid case for their entry?

Not convincingly. While they argue for growth potential, the revenue per user in India will likely be lower than in other markets. They plan to launch more satellites to expand coverage, but the competition is fierce.

Gwynne Shotwell, SpaceX’s CEO, has positioned the company as a David against Goliaths in the telecom industry, but the reality is that they’re a $1.25 trillion company competing against established giants. The bull case for Starlink hinges on its unique position, but the spending on AI is concerning, especially with significant losses in that division.

Investors seem to be betting on promises rather than fundamentals. The total addressable market for AI is projected at $28 trillion, but the basis for that figure is unclear. It feels like a lot of “trust me” without solid evidence.

The case for SpaceX’s IPO is built on its successful launch business and Starlink’s growth, but adding the AI market into the mix raises questions. Why not focus on the solid fundamentals instead of inflating the addressable market with lofty AI projections?

Musk sees this as a unique opportunity to raise substantial capital, potentially $50 to $75 billion, which would surpass the previous record set by Saudi Aramco. By tying AI into the narrative, he can attract more investors and generate excitement.

What does Musk intend to do with that capital?

Ultimately, he aims to fund ambitious projects, including getting people to Mars. Building Starship and establishing data centers are costly endeavors, and he needs that cash to support his vision for Musk Inc.

It’s worth noting that Musk doesn’t engage in typical wealthy pursuits. He’s not buying luxury items; instead, he’s focused on his ambitious goals, which require significant funding.

The AI aspect is puzzling, especially since there’s little evidence that Musk’s AI efforts are competitive. While Grok has distribution on X, it’s still behind in the model race compared to competitors like OpenAI and Anthropic.

Can Musk catch up by hiring top talent from those companies?

It’s possible. Musk has hinted that xAI could improve and regain its competitive edge. His business plans are fluid, and he’s shown a willingness to pivot quickly. There’s always a chance he could return to leading the AI frontier.

To conclude, we’ve come full circle to Musk’s acquisition of Twitter, now X, and its transformation into the “everything app.” Despite predictions of reputational damage, he’s on the verge of a massive IPO. However, the rules have shifted to favor him. If we were operating under normal circumstances, would this IPO be as successful?

Probably not to the same extent. There would still be excitement around Musk, but the forced inclusion in index funds amplifies the hype. Many investors may overlook his controversies, viewing him as a successful entrepreneur.

Are there any other potential correctives to this situation, or are we simply along for the ride?

Accountability for someone like Musk is a complex issue. The usual mechanisms seem to have vanished, and we might just be along for the ride.

One notable aspect of this IPO is that shareholders agree to arbitration for any disputes, limiting their ability to pursue legal action. Musk has effectively removed obstacles that could challenge his control, creating a significant barrier to accountability.

Well, Ryan, it seems we’re both destined to become SpaceX shareholders. Thanks for joining me on Decoder; this has been a fantastic conversation.

Thanks for having me! I’ll see you on Mars.

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