Access to water now a risk factor in SpaceX IPO

SpaceX has added a new formulation to its IPO application, which warns potential investors against the company’s access to a potentially scarce resource: water.

The company, which is now also part of Elon Musks' AI company xAI, wrote on Monday, as amended, that access to water – which is required to cool its data centers – is just as important as the ability of SpaceX to secure electricity, processors and other critical resources.

The addition takes place in the midst of a constantly evolving debate on how much water data centres consume and whether this consumption contributes to local droughts that are worsened by climate change.

In the “risk factors” section of the IPO application of SpaceX, the company added a language about water to a section on the challenges of scaling the AI infrastructure.

Previously, SpaceX focused on telling investors that its data centers are restricted mainly by access to “electricity at economically reasonable prices” and by long construction times and material shortages. The changed submission adds several lines to the water access. SpaceX now informs potential investors at the IPO that the expansion of data centers is restricted by the “availability of electricity and water at economically reasonable prices”.

The company continues to demonstrate that “a significant amount of water resources could be required for the cooling of large data center enterprises.” Water availability is so worrying that, according to SpaceX, it has become a “critical point of view in the selection, development and operation of data center locations”.

SpaceX also says that “water scarcity, drought conditions, competition for local water resources or regulatory restrictions on water consumption restrict our ability to maintain sufficient water for cooling, restrict the data center’s cooling capacity, increase our costs, delay or limit the expansion of our data center infrastructure, or force us to implement alternative cooling techniques that may be more expensive or less available.”

It is not clear what SpaceX has inspired to include this language over water in its documents, or why it was omitted in the original version. The Company is in the phase before the IPO, where the Securities and Exchange Commission (SEC) has sent “comment letters” to SpaceX asking for clarification or additional details for submission. It is possible that SEC's questions have led to this particular change. However, we will only find out if these commentaries are published in the weeks after the IPO.

Adding further details on accessing SpaceX to water was not the only change the company made in this first amended submission. SpaceX also announced that up to 5% of the shares sold under the IPO will be available to employees and friends of executives. SpaceX also added a word that warns investors that the company could issue a “essential” number of shares in future transactions after the IPO – an indication of a possible merger with Tesla – which could lead to a dilution of existing shareholders.