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It will be the mother of all IPOs. <\/p>\n
Last year notched a comeback for initial public offerings, and the resurgence greatly boosted capital market profits at big-name financial institutions, and helped generate a banner year for investment banker bonuses. But now a single IPO is poised to raise more money alone than all 90 of last year\u2019s IPOs combined\u2014and that means Wall Street will make more money, too.<\/p>\n
This super-whale is none other than Elon Musk\u2019s SpaceX, which just mushroomed in size via its all-stock acquisition of another bastion of the tech titan\u2019s empire, xAI, creator of the chatbot Grok. News that Musk planned an IPO for SpaceX emerged in December, around the time a new funding round valued the rocket enterprise at $800 billion. In January, just prior to being bought by SpaceX, xAI achieved a $230 billion cap via a fresh capital raise.<\/p>\n
Hence, investors are already giving the combined companies an equity valuation of over $1 trillion. And Musk wants more. According to reports in Bloomberg and the Financial Times, <\/em>he aims at an offering that would give the new SpaceX a market cap of $1.5 trillion, raising around $50 billion in cash to fund expansion. Analyst Franco Granda of PitchBook believes that a $1.75 trillion mark is justifiable based on SpaceX\u2019s gigantic growth opportunities, especially for its Starlink satellite franchise.<\/p>\n The actual prospects for SpaceX\u2019s future financial performance and stock price are highly uncertain, since as of today, by Fortune<\/em>\u2019s analysis, after 23 years it still generates zero net earnings. To justify a $1.5 trillion market cap, it would need to earn more than Berkshire Hathaway does to generate decent returns for shareholders.<\/p>\n But one cohort is en route to pocketing a never-before-seen windfall while taking virtually no risk: the Wall Street banks that shepherd the deal.<\/p>\n At $1.5 trillion, the SpaceX debut would rank as the second-most-valuable IPO in history\u2014trailing only the Saudi Aramco introduction at a total valuation of over $1.7 trillion in late 2019, and leagues ahead of No. 2 Alibaba at $169 billion (2014).<\/p>\n A $50 billion raise through an IPO, meanwhile, would top the all-time list, according to data compiled by Bill Megginson, a professor at the University of Oklahoma. Adjusted for inflation, SpaceX would edge out current leader Nippon Telegraph & Telephone (1987) at $44 billion, while dwarfing such others in the top dozen as Visa ($27 billion in 2008) and SoftBank ($28 billion in 2018). And indeed, $50 billion surpasses the cumulative $44 billion raised through 90 IPOs last year.<\/p>\n The record-setting raise should translate into a never-before-witnessed take for Wall Street. In the IPO world, those dollars come in two forms. The first: the underwriting fees\u2014or what\u2019s known as the \u201cgross spread\u201d\u2014that the banks receive for preselling shares to institutional investors before they start trading, and are hence offered to the general public. Jay Ritter of the University of Florida, the leading academic expert on IPOs, reckons that on a deal this immense, the charge would be around 2%. At this figure, the fees for placing the newly issued $50 billion in stock come to $1 billion.<\/p>\n According to Ritter, most big IPOs have two to three \u201clead underwriters\u201d or \u201clead book runners.\u201d They are the ones empowered to allocate the shares on offer among themselves and the other members of the syndicate, a group that typically might total 20 or so. Judging from past offerings, Ritter estimates that the SpaceX book runners could collect some 35% of the fees, or roughly $350 million, with the rest divided among the members hitching a ride.<\/p>\n High as those numbers tower, the main prize is the second money-spinner from IPOs, the gain the institutions handpicked by the underwriters for big allocations garner on the \u201cpop\u201d when the the stock starts trading. Put simply, the underwriters have a strong incentive to award the shares to their biggest trading partners at bargain prices that exclude lots of potential investors who would pay even more. The power to create an artificial shortage is tremendously enriching for the investment banks. <\/p>\n Ritter\u2019s research shows that underpricing is de rigueur in IPOs, and on average, the shares jump 19% over what the chosen institutions paid by the end of the first trading day. \u201cThe ability to give their clients underpriced shares is worth a lot more than the 2% fees,\u201d says Ritter. Were SpaceX to leap that average of 19% on day one, Wall Street\u2019s customers would pocket a one-day paper gain of $9.5 billion. The initial investors got their shares owing to their status as the firms\u2019 largest, commission-paying trading customers. In exchange for winning the supercheap shares, says Ritter, they typically rebate about 30% of the one-day gain to the book runners who anointed them in future business. In SpaceX\u2019s case, then, the two or three lead book runners would collect an extra nearly $3 billion (30% of the roughly $9.5 billion windfall). Let\u2019s assume three lead underwriters. Each would garner a total as high as $120 million in fees, and another $1 billion courtesy of the super-discount pricing, for a total of almost $1.1 billion.<\/p>\n On the one hand, SpaceX would \u201conly\u201d be raising 3% of its total market cap in a $50 billion offering. A typical underwriter argument is that the underpricing cost, in this case almost $10 billion, is small change for the benefit of collecting a stable, loyal base of institutional shareholders, and getting lot of sell-side research from the book runners and other brokerage firms that underwrote the offering.<\/p>\n Still, sacrificing over $10 billion (including fees) would be a big deal for SpaceX, especially given its extensive requirements for capital expenditures that cash flows apparently don\u2019t cover: xAI alone reportedly spent $8 billion on plants and equipment in 2025, and though we haven\u2019t seen estimates for SpaceX, as a maker of 400-foot rockets en masse, it\u2019s the ultimate in metal-bending manufacturers.<\/p>\n According to Ritter, Musk has two excellent options for keeping a lot of the cash that would otherwise flow to Wall Street in SpaceX\u2019s coffers. The first is doing a \u201cdirect listing.\u201d That\u2019s a mechanism that avoids the presold underwriting procedure and allows market makers on the exchanges to set the opening price based on the orders coming in from everyone who wants the shares, not just those handpicked by the lead book runners. In direct listings, the existing shareholders cash out, for example, but to date, the company itself doesn\u2019t raise extra cash. But Musk could then do a follow-on offering at a higher price than a traditional IPO would have generated, potentially leaving far less on the table. Spotify, Palantir, and Coinbase all used direct listings to go public.<\/p>\n A second possibility: Deploying a program known as \u201climit order book building.\u201d DoorDash and Airbnb both used it in establishing their listings. It\u2019s where the institutional investors must show both the quantity of shares they want, and the price they\u2019re willing to pay for them, as opposed to just asking for shares. That solution wouldn\u2019t prevent all the underpricing by any means, but it would greatly curb the biggest expense to SpaceX.<\/p>\n Or, as Ritter suggests, Musk could use the threat of either a direct listing or limit order approach to both drive down the fees and get a closer to market price from the underwriters\u2019 clients. \u201cMusk is known as a maverick, a guy who thinks out of the box,\u201d says Ritter. \u201cHe fits the profile of the kind of CEO that in the past has gone for this kind of tradition-breaking solution.\u201d To be sure, Musk\u2019s a rebel. We\u2019ll soon see if he\u2019s got the spine to stand up to Wall Street.<\/p>\n<\/div>\n #SpaceX #poised #raise #money #IPO #raised #years #IPOs #combined<\/p>\n","protected":false},"excerpt":{"rendered":" It will be the mother of all I… <\/p>\n","protected":false},"author":1,"featured_media":26711,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2],"tags":[11996,554,3907,798,2221,27,1556,1200,102,795,953,84],"_links":{"self":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/26710"}],"collection":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=26710"}],"version-history":[{"count":0,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/26710\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/media\/26711"}],"wp:attachment":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=26710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=26710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=26710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The fees on a SpaceX IPO would be huge, but the big money comes from underpricing<\/strong><\/h2>\n
What are Musk\u2019s options for taking SpaceX public?<\/h2>\n