Why EchoStar Stock Jumped on Potential SpaceX IPO.

An Ariane-5 rocket blasts off in 2012 carrying an EchoStar communications satellite. An EchoStar-SpaceX deal for wireless spectrum in September has sent EchoStar shares to the moon. (Photo by JEROME VALLETTE/CNES/AFP via Getty Images)

Elon Musk’s rocket company SpaceX is the most valuable aerospace & defense company on this planet. It’s growing fast, but privately held, putting it out of reach for most investors.

There is a publicly traded stock that has become inextricably tied to SpaceX’s valuation: satellite communications company EchoStar .

Shares of EchoStar jumped $10 in late trading on Tuesday, closing at $93.54, up 6%, after Bloomberg reported that Elon Musk’s space technology company SpaceX might be headed for a 2026 initial public offering.

SpaceX didn’t immediately respond to a request for comment.

EchoStar stock tracks SpaceX’s valuation because, in September, EchoStar announced a deal to sell its AWS-4 and H-block spectrum licenses to SpaceX. Spectrum—the frequencies over which wireless calls travel—is a finite resource that every mobile company needs.

As part of the deal, EchoStar got $8.5 billion in SpaceX stock. At the time of the deal, SpaceX was valued at about $400 billion.

EchoStar stock traded from the high $60s to the high $70s following the SpaceX deal. It has kept rising. EchoStar started Tuesday around $88 a share.

Coming into Monday trading, EchoStar stock was up 20% for the month of December. SpaceX was responsible for that jump, too. On Friday, SpaceX was reported to be seeking an $800 billion valuation. Musk seemed to play down the possibility, saying in part on X that SpaceX is already cash-flow positive, meaning it doesn’t have a pressing need to raise cash by selling stock.

Still, the possibility of a new private market valuation or IPO is causing Wall Street to re-evaluate EchoStar’s outlook. On Tuesday, New Street Research analyst David Barden took his price target for EchoStar stock to $125 from $100, citing the SpaceX private market valuation report, as well as changes in spectrum deployments that could make commercially available spectrum, which EchoStar possesses, more valuable.

A $25 price target bump adds about $9 billion in market value, based on EchoStar’s roughly 353 million fully diluted shares outstanding.

Other analysts besides Barden are more positive, too. Since the SpaceX deal in September, the average analyst target price for EchoStar stock has moved up about $43, from $50 to $93. Through Tuesday trading, however, EchoStar stock is up only $32 over the same span.

There are $11 missing dollars. Now, there is no reason that Wall Street price targets and stock prices need to line up exactly on any given day. Still, it’s one way to understand recent trading in EchoStar stock.

Another way to look at what’s happened is to consider changes in the total value of EchoStar, including debt. After the SpaceX deal, the market valued EchoStar at about $40 billion, excluding the value of its newly acquired SpaceX stock. Now, the EchoStar’s value ex-SpaceX is closer to $36 billion.

The decline feels a little odd, but the situation is unique.

Write to Al Root at allen.root@dowjones.com