SpaceX Could Deliver an $11.6 Billion Windfall for 346,000 Teachers and Retirees — Worth $33,500 Each

The Ontario Teachers' Pension Plan (OTPP) saw promise in SpaceX in June 2019, enough to convince it to make the Elon Musk-led company the first investment of its then newly created venture arm. At the time, the arm of the pension plan, now known as Teacher's Venture Growth (TVG), was placing stakes in up-and-coming companies that had outgrown their early financial stages.

According to unnamed sources cited by The Globe and Mail, OTPP made an initial investment in SpaceX in 2019 worth roughly $300 million. It was one of multiple investors that collectively infused funding into SpaceX, with the round later reported to have reached $1.33 billion.

'Our investment in SpaceX fits well within the TIP investment strategy of capitalising on significant global opportunities in new businesses and sectors that are emerging as a result of unprecedented technological change,' said Olivia Steedman, the senior managing director of OTPP, following the 2019 deal.

Now, nearly seven years later, OTPP could be positioned to see significant returns from that investment, with estimates suggesting figures as high as $11.6 billion. This scenario would translate to an implied paper increase of approximately $33,500 for each of the fund's 346,000 active and retired members, should SpaceX proceed with its historic initial public offering (IPO). However, these returns would only materialise if Musk's ambitious plans come to fruition.

Musk's Master Plan

The SpaceX chief executive is reportedly aiming to raise as much as $75 billion through an initial public offering, a move that would value the company at approximately $1.77 trillion. Musk is said to be planning to sell 555.6 million shares at an initial price of $135 per share, according to a filing attributed to the Securities and Exchange Commission.

Should Musk succeed, he would potentially become the world's first trillionaire. The IPO would also make SpaceX the largest public offering in history, surpassing the $29.4 billion raised by Saudi Aramco in 2019, according to a CNN report.

TVG High-Risk Investing Vindication Looms

Assuming the valuation materialises, the returns that TVG stands to receive would be substantial. Such an outcome would vindicate the firm's strategy of making late-stage venture investments despite the elevated risks involved, in exchange for the potential of outsized returns.

A multi-billion-dollar gain would also provide a significant boost to the OTPP unit following several difficult years. In 2022, TVG recorded a $95 million loss from its investment in FTX Digital Markets Ltd, which collapsed amid a surge in customer withdrawals that exposed multi-billion-dollar balance-sheet gaps, ultimately leading to bankruptcy.

TVG has since worked to rebuild its position. In addition to its stake in SpaceX, the OTPP unit has made key investments in companies such as Databricks, allowing it to rebuild its portfolio performance to around 30 per cent.

Even so, a potential $11.6 billion return from SpaceX would stand apart. If realised, it could arguably represent the most successful return on investment the organisation has ever made.

For now, however, the prospect of securing that level of return remains theoretical. There is no guarantee that TVG would be able to fully realise the value of its SpaceX stake following an IPO due to several limiting factors. These include standard lock-up provisions that would restrict existing shareholders from selling their shares for a period of 180 days following the anticipated 12 June start of trading, with only limited tranches permitted thereafter.

According to Gillian Brown, the group's chief investment officer for public and private investments, an IPO does not necessarily represent a target exit point. Instead, the SpaceX investment would be used as a benchmark to assess whether other ventures exist that could deliver similarly attractive long-term returns.