Google's investment in SpaceX: $1 billion turned into $94 billion over a decade
In the world of corporate finance, it's rare to come across a story where a strategic bet pays off a hundredfold. That's exactly what happened with Google's investment in SpaceX. My analysis of Alphabet's latest quarterly report shows that the SpaceX stake, acquired back in 2015, is now valued at approximately $94 billion. At first glance, it might seem like a fresh, large investment, but that's not the case.
How Google entered SpaceX's capital in 2015
In January 2015, Google, together with Fidelity, invested $1 billion in SpaceX, receiving nearly 10% of the company. At that time, the entire SpaceX was valued at just over $10 billion. This round was led by Google. Since then, the company's value has grown many times over. In June, SpaceX went public at a price of about $135 per share, with a valuation of $1.77 trillion — the largest initial public offering in history. Accordingly, Google's stake has appreciated roughly 100 times.
It's important to note that each new funding round diluted Google's stake. Today, it owns about 5% of SpaceX shares.
Why the rise in SpaceX shares barely affected Google's value
The appreciation of the SpaceX stake was reflected in Google's second-quarter report: the revaluation added approximately $99 billion, and quarterly profit reached $112 billion. Investments in the AI company Anthropic also contributed. However, behind these figures, there is almost no "real" cash. Of the $9.11 earnings per share, $6.26 came from the revaluation of assets — without it, the quarter would have been ordinary. Additionally, the revaluation resulted in a tax of $21.9 billion.
The market reacted cautiously: by the close of trading, shares fell by about 1.2%. Investors were more concerned about expenses: over three months, Google allocated $44.9 billion to artificial intelligence and spent $5.9 billion more than it earned.
Most of Google's SpaceX shares remain "frozen"
Google cannot yet sell this stake and freely use the funds. According to the report, $80 billion of the amount is locked up, while the rest will be unlocked later. The stock prices can lose gains as quickly as they gained them. After the IPO, SpaceX shares soared above $200, but by July 23, they had dropped to about $114. The first lock-up expires in August — at the same time, SpaceX will report as a public company for the first time.
The $94 billion figure looks impressive, but it's merely paper profit that cannot yet be cashed out. The real test will come after the lock-up period ends, when Google gets the opportunity to sell.
My expert conclusion: This story is a brilliant example of how an early bet on a tech giant can yield phenomenal returns. However, for investors, it's important to understand the difference between paper and real profit. Until SpaceX shares are fully liquid, this amount remains just a number in a report, not actual cash flow. The market has already shown that post-IPO volatility can be high, and Google will likely wait for a more stable point to exit.