FT Schools - SpaceX's ambitious record IPO

Possible answers include:

• Shares are sold to the general public for the first time.
• The company becomes listed on a stock exchange, such as the NASDAQ.
• Co-ownership is transferred to the (new) shareholders.
• Accept any other relevant feature.

Mark as a 1 + 1.

Advantages include an explanation of any one of the following:

• Raises large amounts of permanent share capital ($75 billion) for SpaceX's expansion.
• Going public cam improves SpaceX's public profile as a listed company, giving it greater access to future finance.
• Accept any other relevant advantage explained in the context of the case study.

Disadvantages include an explanation of any one of the following:

• Loss of control for Musk as ownership is diluted.
• Increased pressure from shareholders for short-term returns.
• Accept any other relevant disadvantage explained in the context of the case study.

Mark as a 2 + 2.

Award [1] for each relevant advantage/disadvantage and [1] for explaining this in the context of SpaceX, up to the maximum of [4].

Possible answers include an explanation of any two of the following:

• Musk vs investors - possible disagreements over the valuation of the company and its control.
• Investors vs regulators - potential concerns about transparency and risks (the decision to go public would increase SpaceX’s accountability and transparency.
• Shareholders vs senior management - pressure for profits from new shareholders vs long-term vision of SpaceX’s senior management (board of directors).
• Accept any other relevant explanation, written in the context of the case study.

Mark as a 2 + 2.

Award [1] for identifying a relevant reason and [1] for explaining this in the context of SpaceX, up to the maximum of [4].

Equity finance is raising capital by selling shares of a limited liability company to investors, giving them ownership rights.

Award [1] for a definition that shows limited knowledge of equity finance.

Award [2] for a definition that shows clear and accurate understanding of equity finance, similar to the example above.

Possible answers include an explanation of any two of the following:

• External finance allows SpaceX to raise large amounts of capital for expansion - For example, its planned IPO aims to raise $75 billion, which can be used to fund highly expensive projects such as rocket development and space exploration.
• It helps to spread financial risks - By selling shares to investors on the NASDAQ stock exchange, SpaceX spreads the risks of space exploration with shareholders rather than relying only on its own internal funds.
• It can improve business growth and competitiveness - Access to significant funding ($75 billion) allows SpaceX to invest in innovation and compete with other firms in the aerospace and technology industries.
• Accept any other relevant reason, explained in the context of the case study.

Mark as a 2 + 2.

Award [1] for each relevant reason and [1] for explaining this in the context of SpaceX, up to the maximum of [4].

Possible advantages include an explanation of any one of the following:

• Economies of scale (larger scale production reduces average costs) - For SpaceX, producing more rockets can lower cost per launch through more efficient use of resources, such as the use of specialist scientists and researchers.
• Greater access to finance - Large firms like SpaceX can attract significant funds (such as the proposed $75 billion IPO), supporting further expansion and innovation.
• Increased market power (market leadership) - Operating at a larger scale allows SpaceX to dominate parts of the space industry, influence prices, and compete more effectively against rivals (such as Amazon's Blue Origin).
• Accept any other relevant advantage explained in the context of the case study.

Possible limitations include an explanation of any one of the following:

• Diseconomies of scale, where average costs may increase as the firm grows - For SpaceX, managing complex global operations and large projects can reduce its operational and cost efficiency.
• Greater stakeholder pressure - As a larger (and potentially publicly held) company, SpaceX faces more scrutiny from investors, regulators, and the public, limiting the managerial freedom that Elon Musk previously had.
• Coordination and communication challenges - With a larger workforce and more departments, decision-making at SpaceX can become slower and less effective.
• Accept any other relevant limitation explained in the context of the case study.

Mark as a 2 + 2.

Award [1] for each relevant advantage/limitation and [1] for explaining this in the context of SpaceX, up to the maximum of [4].