Pengana eyes huge payday as Musk’s SpaceX prepares for mega-IPO

As Wall Street buzzes with anticipation ahead of the historic float of Elon Musk’s SpaceX, Sydney-based Pengana Capital is watching the value of its long-held stake in the rocket and satellite maker soar.

Last month, The Wall Street Journal reported SpaceX was considering raising capital at a valuation of $US800 billion ($1.2 trillion), double what the company was worth just five months earlier. Since then, Musk has declared that SpaceX is targeting a $US1.5 trillion listing later this year, which would make it one of the biggest floats in history.

That is welcome news for Pengana, which is one of the few Australian Fund Managers with exposure to the most valuable privately held company in the world. SpaceX is the largest position in Pengana’s ASX-listed Private Equity Trust, accounting for 7.7 per cent of the portfolio.

While the firm is still valuing SpaceX at $US400 billion, that is expected to balloon when Pengana updates its valuations in coming months, leading to the listed investment company posting outsize returns.

“There’s already an expectation that the valuation is $US800 billion and we’re expecting another big uplift at the actual IPO later this year,” Pengana chief executive Russel Pillemer said on Friday.

“The number being thrown around is $US1.5 trillion which is a nice jump from what we’ve currently got it valued at and a huge leap from when we first invested in it.”

Pengana in late 2020 initiated a near 2 per cent position in SpaceX, when the company was valued at just $US50 billion. That was already an unusually large exposure for the fund, given it holds around 500 companies.

But Pillemer was so excited about the investment that he’s allowed the position to swell to nearly 8 per cent, which equates to a $40 million bet.

“We love the underlying business and think they operate in a fantastic part of the market,” he said. “The world is entering a precarious situation when it comes to defence and geopolitical tensions, so businesses like SpaceX are going to become more and more valuable.”

SpaceX has generated most of its revenue through Starlink, the satellite internet constellation that offers high-speed internet connections to consumers, businesses and government customers.

The fast-growing internet service has already been a crucial tool amid some of the world’s biggest conflicts in recent years.

SpaceX offered free Starlink satellite service in Iran amid deadly protests and a days-long internet blackout. Starlink’s satellites have also provided internet communications for Ukraine and its military since Russia’s invasion, and free broadband to Venezuela citizens following the US government’s seizure of President Nicolás Maduro.

However, SpaceX has been emphasising the artificial intelligence angle of its business heading into its IPO, telling investors that it plans to use the proceeds from a listing to build data centres that will be used to power artificial intelligence processes in space.

The company has interviewed major investment banks to lead a potential float, the New York Times reported this week.

Pengana’s stake in SpaceX sits alongside a newer investment in ChatGPT maker OpenAI.

The added OpenAI to its private equity fund last year and participated in a financing round which valued the company at $US300 billion.

That figure swiftly jumped to $US500 billion by October, before reports emerged in December that OpenAI had held preliminary talks with some investors about raising funds at a valuation of around $US750 billion.

“OpenAI is leading the next generation of technology, and we viewed this as an attractively priced entry point into a business that could become one of the largest global tech companies,” Pillemer said.

Pengana’s Private Equity Trust returned 2.2 per cent last year and has gained 8.7 per cent per annum since inception in April 2019.

Read the original AFR article here

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