SpaceX bonds weakened Wednesday after the company posted results that surpassed analysts’ estimates but also said it was investing aggressively, signaling more borrowing could be ahead. Risk premiums for the aerospace and AI company climbed, following widening for the company’s credit derivatives earlier this week.
Spreads on Space X’s 6.6% notes due in 2046 widened 0.09 percentage point to 2.64 percent points as of 12:35 p.m. New York time. The $2 trillion dollar company beat Wall Street earnings estimates on Tuesday, posting $4.4 billion in net income for the quarter ended in September, far better than expectations of $1.88 billion. Revenue surged 161% from a year ago and also beat expectations. That helped boost the company’s shares as much as 12.44% on Wednesday.
At the same time, the company signaled it plans to spend heavily in the future, with Chief Financial Officer Bret Johnsen saying on a conference call on Tuesday, “We’re investing aggressively” in three areas it believes will generate the highest long-term returns, including in computing for its Super Intelligence division and in Starlink broadband and mobile. But still, talk of aggressive investment stirred fears in the market of the company boosting debt substantially. The company borrowed $25 billion in the bond market in a multi-tranche offering in June. Space X is in talks with banks and investors to raise $40 billion to buy chips from Nvidia Corp., Bloomberg reported earlier this month.
The price of five-year credit default swaps on the company’s debt rose as much as 0.8 basis point to around 232.6 basis points a year, reversing an earlier tightening, according to ICE Data Services. That price has been rising for most of October, reaching new highs multiple times this month. Companies have already borrowed more than $450 billion this year worldwide to fund artificial intelligence, according to data compiled by Bloomberg. For all of last year, that figure was closer to $200 billion.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing