SpaceX IPO explained: The price is set, but retail allocation still up in the air

SpaceX is making waves with its upcoming IPO, poised to set a new record in the market. This historic offering, led by Elon Musk – also the CEO of Tesla – aims to raise an astonishing amount at a valuation that puts it in a league of its own among the public trillion-dollar companies. In a departure from traditional IPO practices, SpaceX has set a fixed share price of $135, bypassing the usual range pricing that reflects investor demand. As the countdown to the share offering begins, the company will need to allocate a staggering $75 billion worth of shares to underwriters and asset managers before trading starts on Friday. According to Lise Buyer, founder of the IPO consultancy Class V Group, “Elon has dictated the price, and if investors embrace it, that’s a significant milestone.” However, the challenge remains to determine how these shares will be distributed. Unlike the typical process where pricing occurs the night before the market launch, SpaceX’s approach allows for earlier allocation due to its fixed price. This model is particularly intriguing given the scale of the offering. SpaceX anticipates a market cap of $1.77 trillion, despite reporting $18.7 billion in revenue last year, coupled with an operating loss of $4.2 billion. This raises questions about investor sentiment, especially when compared to other trillion-dollar companies that have higher revenue and profitability. With a goal of reserving around 30% of shares for retail investors – amounting to roughly $22.5 billion – SpaceX is aiming to engage a broader audience. Typically, retail allocations range from 5% to 10%, but this ambitious target reflects the company's desire to connect with individual investors. Brokerage platforms including Charles Schwab, Fidelity, Robinhood, SoFi, and E-Trade will facilitate the sale of these shares, although the final allocation will remain uncertain until the books are closed. The IPO promises to be a key moment not just for SpaceX, but for the market as a whole, as it navigates unprecedented waters in the world of investments.