What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing. Perhaps nobody alive today is as influential in the worlds of business and technology as elon musk as techno king of tesla. He has revolutionized the automotive industry by popularizing the electric vehicle as founder and ceo of spacex. He has revolutionized the space industry by making reusable rockets a reality, improving that private companies can advance space technology and the past two years have been great for him.

With the parabolic rise in tesla's share, price musk has claimed the crown of world's richest man with a net worth of 292 billion dollars. This makes him almost 50 richer than jeff bezos, who has previously claimed this title for many years. Tesla continues to blow past wall. Street's expectations and now has a market cap well in excess of one trillion dollars, but not everything is going well in musk's empire.

Just as tesla has finally achieved success. His other company spacex has ran to some serious problems. It is unclear if they will be able to continue operating under their current business model in a recent internal email obtained by cnbc, elon musk told spacex employees that the company faces the risk of bankruptcy in the coming years. This is a shocking statement to hear from the founder and ceo spacex has been a pioneer in the private space industry being the first ever private company to make reusable orbital rockets.

They have performed numerous commercial launches and deployed 1 700 starling satellites with over 140 000 customers using starling for wi-fi in remote areas. Today, with the company having so much momentum over the past few years, it came as a huge shock that they now sit on the brink of bankruptcy. The problems revolve around starship, which is the company's most ambitious project. Yet the starship, which is still under development, is the company's biggest rocket ship and will be fully reusable.

It will be capable of taking humans to mars, and importantly, it will be able to launch starling satellites much more efficiently than the falcon 9 rockets that they are currently using. Spacex uses the massive raptor engines and dozens of them will be needed for each starship. To start producing starships at scale, they need to massively ramp production of the raptors in musk's own words. Raptor production has been a disaster, as manufacturing bottlenecks have caused production to significantly underperform expectations.

It appears like spacex is going through its own version of production hell similar to what tesla has to get through with model 3 production, musk canceled his own thanksgiving holiday plans and will personally take charge of the raptor engine production line over the weekend. In this video. We'll look at what exactly went wrong at spacex, how close they actually are to bankruptcy and whether or not elon musk will be able to solve the situation. The starship is a true behemoth.

It stands at 390 feet tall, which is roughly the height of a 28 story. Skyscraper the large size of the spacecraft is necessary, so it can store enough fuel to make the 38 million mile journey to mars. Its large size will also help with the deployment of the starling satellites. They are currently using the smaller falcon 9 rocket, which can deploy 60 satellites with each launch.

One starship can bring 400 satellites into low earth orbit or almost 7 times, as many also. The falcon 9 is only partially reusable. The booster is reusable and can land back on earth. While the upper part of the rocket is disposable, the starship will be completely reusable and thus is much more cost effective.

In the long run. Currently, spacex has launched 1 700 internet satellites into orbit as part of their starlink program. As of today, about 140 000 people paid 99 dollars per month to access starlink internet from remote areas that have been neglected by traditional internet service providers. While this is already an impressive accomplishment, musk wants to more than 10x.

The scale of starlink can serve millions of customers around the world within the next few years. To make this a reality, they're planning to launch 30 000 satellites in what they call starlink version 2.. This is almost 20 times greater than the current number of starling satellites. In orbit also, the version 2 satellites will be much larger and more sophisticated, making them even more difficult to transport with the falcon 9.

30 000 satellites would require at least 500 falcon 9 launches. This is economically infeasible, given that the rocket is only partially reusable spacex went all in on the starship, and its success is required if they want to succeed with a starling program or an eventual manned mission to mars. The company has spent billions of dollars developing the starship, as well as their massive production facility in boca, chica texas. This picture gives you a sense of the rocket's massive scale, just the nose pieces as tall as the massive spaceship hangers and many times taller than a car.

So how has the company funded all this expensive development spacex has two primary ways of generating revenue. First off they launched satellites and other payloads for both governments and commercial customers. For example, in 2012 they were the first private company to deliver a payload to the international space station. These launches provide the company with tens of millions of dollars each they also charge 99 per month for access to starlink internet.

With their current customer account of 140 000. They generate about 169 million dollars in sales per year. While this sounds like a lot, it's not nearly enough to fund their ambitions to date, the starship program has eaten up almost all the money that spacex generates internally. They have enough money to last a year or so, but until they can start mass production of the starship they're working on borrowed time, it's critical for the company to start launching regular starship flights in 2022.

In fact, musk says that they must launch a starship once every two weeks throughout 2022. If the company is to stay solvent and the hardest part of this is mass. Producing the raptor engines used to power the spacecraft a few weeks ago, musk fired the spacex vice president in charge of raptor production due to lack of progress after his departure, spacex employees found the problems with raptor production were far worse than originally thought. This is musk's internal email to spacex employees, as reported by the verge he says quote.

Unfortunately, the raptor production crisis is much worse than it seemed a few weeks ago, as we have dug into the issues following the exiting prior senior management. They have, unfortunately, turned out to be far more severe than was reported. There is no way to sugarcoat this. I was going to take this weekend off as my first weekend off in a long time, but instead i will be on the raptor line all night and through the weekend, what it comes down to is that we face a genuine risk of bankruptcy.

If we cannot achieve a starship flight rate of at least once every two weeks next year, unquote, this is strikingly similar to tesla's situation in 2018, when they were first ramping up model 3 production. Musk said the company came within single-digit weeks of bankruptcy and he personally took control of the production line going so far as to pull all-nighters in the plant and sleeping on the conference room couch as it turned out. He was ultimately successful and the model 3 ramped up massively over the following years, but just because musk was successful once doesn't mean he'll be able to pull a rabbit out of the hat. For the second time, mass production of rocket ships is obviously incredibly complicated.

You can think of a factory as a machine that builds machines. Thus, the factory is far more complicated than the rocket which itself is already rocket. Science making rockets as big as a starship at scale is something never done before in history. Spacex has to reinvent the playbook as they go along.

It's like trying to construct a sailboat and sail it at the same time, there's a significant probability that spacex will not be able to make its target of one launch every two weeks next year. Does this mean that the company will go bankrupt and humanity's hopes for reaching mars will be flushed down the drain? The reality is much more optimistic than this. In 2008, both tesla and spacex were on the brink of bankruptcy. Musk took all the money he had left from his sale of paypal and split it between the two companies.

He said his businesses are like his children and he would do everything to save them, even if it left him financially ruined, but elon musk is in a much better position today than he was in 2008. His 20 stake in tesla is worth more than 200 billion dollars, which is hundreds of times greater than his net worth in 2008. In a worst-case scenario, he could sell a few billion dollars worth of tesla stock and put the money into spacex. Given how vast his tesla wealth is, he could keep this up almost indefinitely.

This is a strategy that jeff bezos uses to fund his competing blue origin space company. He sells about one billion dollars of amazon stock per year to fund the company, which is less than one percent of his current stake. This way, blue origin can survive pretty much indefinitely, despite being a cash incinerator. Musk is now significantly richer than bezos, so there's no way that he'll allow spacex to go bankrupt rocket.

Ship production is difficult and there could definitely be delays in cost overruns, but with musk having 300 billion dollars in the bank humanities space fairing ambitions are in good hands. Alright, guys that wraps it up for this video. What do you think about the starship production delays? Do you think spacex has any probability of going bankrupt? Let us know in the comments section below, as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.