SpaceX and the South Sea bubble - the historical parallels

By Paul Glass, Founder Devon Funds Management

While SpaceX is unquestionably a real and highly successful business, aspects of the current investment narrative bear a striking resemblance to the enthusiasm that surrounded Britain's South Sea Company during the famous South Sea Bubble of 1720.

The South Sea Company was founded in 1711 and promised investors access to vast trading opportunities in South America. In practice, the company generated relatively little commercial success. Instead, its soaring valuation became increasingly driven by investor belief in a future that seemed almost limitless. Shares rose from around £100 to nearly £1,000 in 1720 before eventually collapsing when expectations outran reality.

SpaceX is fundamentally different in one critical respect: it possesses a substantial operating businesses. The company dominates global orbital launches, operates the rapidly growing Starlink satellite network, and has generated billions of dollars in annual revenue. Unlike the South Sea Company, SpaceX's underlying business is not a fiction.