Want to Own a Piece of SpaceX? EchoStar Just Might Be the Best Way In.

SpaceX’s valuation has gone to the moon, rising to some $400 billion from roughly $140 billion two years ago. Elon Musk’s rocket company has become the world’s most valuable aerospace and defense company. (RONALDO SCHEMIDT/AFP via Getty Images)

EchoStar has completely remade its balance sheet and its investment case. Now, it’s a primary way to invest in Elon Musk’s privately held space-technology company, SpaceX.

Monday, EchoStar announced a deal to sell the company’s 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. Just as two radio stations in the same city can’t broadcast on the same frequency, companies such as AT&T, Verizon Communications, and T-Mobile US need spectrum for their customers’ calls and data.

SpaceX will pay up to $8.5 billion in cash and, importantly, up to $8.5 billion in SpaceX stock in the transaction. The move values Echostar stock at about $23 billion, which means the SpaceX stake, assuming the deal closes, represents more than 35% of Echostar’s market value.

Echostar stock rose 19.9%, closing at $80.63, while the S&P 500 and Dow Jones Industrial Average rose 0.2% and 0.3%, respectively.

Echostar, in one respect, has transformed itself into a SpaceX investment in a matter of weeks.

Coming into Monday trading, EchoStar was up about 194% year to date. Gains were catalyzed by significant restructuring. In August, Echostar agreed to sell $23 billion of spectrum to AT&T. Before the sale, Echostar had about $30 billion in debt. It was expected to generate only about $1.3 billion in 2025 earnings before interest, taxes, depreciation, and amortization, or Ebitda, according to FactSet. That debt-to-Ebitda ratio is much higher than investors are typically comfortable with.

Things have changed dramatically. Including all sales, “EchoStar will receive $40 billion for its spectrum holdings,” wrote New Street Research analyst Philip Burnett in a Monday report. After tax and deal-closing considerations, Echostar “will also have $1 billion of net cash.”

Debt is no longer a concern. Now, Echostar is composed of spectrum assets, a satellite business, Boost Mobile—and the SpaceX stake. Burnett says that’s worth $89 per share, adding that SpaceX’s valuation rose by 30% over the past six months to about $400 billion. Another 30% rise elevates his Echostar value to $100 a share.

SpaceX’s monster valuation makes it the most valuable aerospace and defense company on the planet. GE Aerospace is second, with a market value of almost $300 billion. Boeing and Airbus have a combined market value of some $350 billion.

Getting a hold of SpaceX stock, however, hasn’t been easy for interested investors. Some platforms, such as Rainmaker Securities, trade shares of private companies. Generally, investors interested in direct ownership have to be accredited, and fees can be high.

Some funds—including ARK Venture Fund and Baron Focused Growth Fund —own SpaceX stock, but those funds own other stocks as well. SpaceX accounts for about 12% of the ARK Venture Fund and about 10% of the Baron Focused Growth fund.

SpaceX accounts for about 52% of the Destiny Tech100 exchange-traded fund, a closed-end fund with a June 30 net asset value of $6.92 a share. Fund shares, however, closed at $25.68, a 271% premium to their net asset value.

That premium is one example of how much investors want SpaceX exposure, which is one reason potential SpaceX investors will start to gravitate to Echostar stock.

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