By Michael Pakaluk
At the height of investment clubs—back in the dark ages, a long time ago, in 1998!—ordinary retail investors would gather and use a tool like the NAIC’s “Stock Selection Guide” to pick stocks based on a ten-year record of sales, earnings, and profitability.
These sober “retail investors” did not even look at a prospectus. A newly launched company was simply too speculative. They sought long-term bets as reliable as bank interest, but with better returns. Their question was not: “How do we make 20 percent in a few days?” but “Which company deserves our hard-earned money, if we are not spending it on household needs?”
But if that sort of person had considered an “initial public offering” (IPO), they would have considered it madness not to study the prospectus.
Remember what a prospectus is? After the stock-market crash of 1929, Congress required any new company raising money from the general public to file a report (“S-1”) detailing its business plan and risks, along with audited financial statements.
One might naïvely suppose that a company’s duty to file such a report corresponds to a duty on the part of the public actually to read it. But no one does, in a world where, in an instant with a smartphone, one can bet on Kalshi about who will win the next game or the next election.
Certainly, a “Catholic ethic of investing” begins with sobriety.
Does not a prospectus deserve even greater weight when demand for a company’s shares seems absurdly high, given the economic fundamentals, as in the case of Elon Musk’s SpaceX?
It trades at more than 100 times its trailing sales (sales, mind you, not earnings, because it has not yet been profitable) and its leverage is high. And yet, until yesterday it had become the fifth most valuable public company by market capitalization, behind only mega-giants such as Nvidia and Apple.
The size of its IPO was so disproportionately large that it must say something about our character and even about our civic religion. To get a sense of the scale: if the previous largest IPO were an urban bus, SpaceX’s IPO would be a jumbo Airbus jet.
Its prospectus also seems important because of SpaceX’s governance. Shareholders are barred from suing the company, and Elon Musk controls 85 percent of the votes. So buying SpaceX is, in practice, handing the money to Elon Musk. His vision governs. And his vision is in the prospectus.
The whole spectacle seems so strange to me that I want to ask what religious belief, what faith, is inspiring it.
Faith in a “paradigm shift,” as one would expect: “We believe that the next paradigm shift for humanity is the creation of a resilient and perpetually expanding space civilization that drives continuous innovation across new frontiers, ultimately leading us to Kardashev Type II status; we believe we are capable of ushering in an era of unprecedented economic expansion, while also helping to safeguard humanity’s future against existential risk.”
Kardashev was a Russian scientist who classified civilizations as more or less advanced, not on the basis of their philosophy or art, but rather according to the breadth with which they harnessed the energy of their local sun, or even of their entire galaxy.
The prospectus reads in many passages like a religious treatise, not a mere business plan. It has two sections titled “Why This Matters Now,” with language such as this:
For the entirety of its existence, human civilization has lived on a single celestial body: Earth. The current paradigm, in which human civilization is confined to a single planet, exposes humanity to existential threats that are unpredictable and uncontrollable at a planetary scale. These threats include natural catastrophic events—such as asteroid impacts, volcanic activity, or solar fluctuations—as well as man-made global conflicts. Geological and astronomical records indicate a non-zero probability of extinction-level events occurring in periods measurable in millions of years. Dependence on a single planetary home constitutes a single point of failure and carries an existential risk with a probability of one that must be resolved. By moving beyond the only home we have known, we secure redundancy at the species level and ensure that the light of consciousness is not tied to a single planet subject to the inevitable hazards of a harsh and vast universe. We do not want humans to share the fate of the dinosaurs. We want to give them a reason to look forward with excitement, with the prospect that we are entering an era of abundance with an infinitely prosperous and exciting future.
SpaceX positions itself as the leader in a new “era of abundance” to be found in space: “space and AI will enable an era of abundance that will lead to unprecedented expansion in the global economy.” The company will help usher in an “era of abundance that we believe has the potential to drive unprecedented expansion in the global economy.”
Newman says in one of his sermons that true faith is like a wager. What would you lose, he asks, if Christianity turned out to be false? That is the measure of your faith: how much you bet on its truth. Faith is an “adventure,” he says. It necessarily means taking a risk.
What risks are the owners of SpaceX shares accepting? A prospectus must have a “Risk Factors” section. Perhaps the most interesting is this: “Several of our anticipated market opportunities, including certain AI, orbital, lunar, and interplanetary industrial and transportation activities, are still emerging and evolving or do not currently exist, and such markets may not develop as we expect, or at all.”
Perhaps the mission statement already said enough: “Our mission is to build the systems and technologies necessary to make life multiplanetary, understand the true nature of the universe, and extend the light of consciousness to the stars.”
That is its animating faith. “One wants to wake up in the morning and think the future is going to be great,” Elon Musk is quoted as saying in the very first line of the prospectus.
About the Author
Michael Pakaluk, a specialist in Aristotle and an ordinary member of the Pontifical Academy of St. Thomas Aquinas, is Professor of Political Economy at the Busch School of Business at The Catholic University of America. He lives in Hyattsville, Maryland, with his wife Catherine, also a professor at the Busch School, and their children. His collection of essays, The Shock of Holiness (Ignatius Press), is now available. His book on Christian friendship, The Company We Keep, is now available from Scepter Press. He was a contributor to Natural Law: Five Views, published by Zondervan last May, and his most recent book on the Gospels was published by Regnery Gateway in March, Be Good Bankers: The Economic Interpretation of Matthew’s Gospel. You can follow him on Substack at Michael Pakaluk.