Elon Musk And Tesla Are Hobbling SpaceX's Long-Term Viability

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About: SpaceX (SPACE), Includes: TSLA
by: John Engle
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John Engle
Value, special situations, Deep Value, Growth
Summary

Tesla's brand – as well as Elon Musk's personal brand – is built on sustainability and futurist positivity; while beneficial for the EV company, this has limited another Musk company.

SpaceX has successfully disrupted the space launch industry, but has failed to become profitable; with fewer launches in 2019 than in either 2018 or 2017, it needs another income stream.

Government weapon systems contracts would make an obvious and synergistic play for SpaceX; however, it is foreclosed from pursuing the opportunity due to the potential negative impact on Tesla's brand.

Tesla's brand and reputation are buoyed by a hardcore of true believers, but supported by a much wider following; moving into weapon systems, though more stable and lucrative than launch, could alienate customers from Tesla.

Thanks to the deep pockets of the Defense Department, weapon systems contracts are immensely valuable and big multi-year development contracts, with a tendency for massive cost overruns to be the norm rather than the exception