Google's investment in SpaceX: $94 billion in paper profits, but real money remains unavailable for now
In its recent quarterly report, Google disclosed the value of its stake in SpaceX — approximately $94 billion. The foundation for this position was laid back in 2015, when Elon Musk's company was just gaining momentum.
At first glance, this might seem like a fresh major investment, but in reality, it is the result of a decade-long strategy. In January 2015, Google and Fidelity jointly invested $1 billion in SpaceX, acquiring nearly 10% of the company. At that time, the entire SpaceX was valued at just over $10 billion.
Value increased 100-fold, but the stake was diluted
Over ten years, SpaceX's value has skyrocketed. In June, the company went public at around $135 per share, with a valuation of $1.77 trillion — the largest initial public offering in history. Google's stake appreciated roughly 100 times. However, each new funding round diluted the tech giant's share. Today, Google owns about 5% of SpaceX's shares.
Why the market didn't appreciate the "space" profit
The revaluation of the SpaceX stake added about $99 billion to Google's second-quarter earnings, pushing quarterly profit to a record $112 billion. But behind these figures, there is almost no real cash. Of the $9.11 earnings per share, $6.26 came specifically from asset revaluation. Without it, the quarter would have been ordinary. Moreover, the revaluation resulted in a $21.9 billion tax bill.
The market reacted cautiously: Alphabet's shares fell by about 1.2%. Investors were more concerned about expenses — over three months, Google allocated $44.9 billion to artificial intelligence, spending $5.9 billion more than it earned. Record investments in AI alarmed market participants, and analysts had warned of this risk even before the report was published.
"Frozen" asset and the first lock-up
Google cannot yet sell its SpaceX stake and freely use the funds. According to the report, $80 billion of the amount is locked, with the remainder to be unlocked later. Additionally, after the IPO, SpaceX shares surged above $200 but dropped to around $114 by July 23. The first lock-up expires in August — at the same time, SpaceX will report as a public company for the first time.
Expert comment: The situation with Google and SpaceX is a classic example of "paper wealth." $94 billion looks impressive, but the real test will come after the lock-up expires, when Google gains the ability to sell. The market is already showing volatility, and I expect that after the restrictions are lifted, we will see significant pressure on SpaceX shares, which could also adjust the valuation of Google's stake.