Jennifer Saibil, The Motley Fool
4 min read
SpaceX is slated to be the biggest initial public offering (IPO) ever on the stock market. Management is plans to offer 555,555,555 shares at $135 each to raise $75 billion. To put that in perspective, the most a company ever raised was $26.5 billion by Saudi Aramco in 2019, and the most raised on a U.S. stock exchange was $21.8 billion by Alibaba in 2014.
It’s a historic moment, and it’s planned for this week. Here’s what to expect.
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A lot of retail investing
According to Reuters, SpaceX plans to offer as much as 30% of the share sale to retail investors. It’s unusual for any IPO stock to go to retail investors, although it’s been happening through online trading platforms like Robinhood Markets (NASDAQ: HOOD) and SoFi Technologies (NASDAQ: SOFI). The company is aiming to raise a lot of money, and it might need the extra demand.
At the same time, it could be tapping into Elon Musk’s strong and devoted following. The company says that “at our request,” it will offer IPO shares to retail investors beyond the investment banks underwriting the stock. Retail investors can submit an indication of interest (IOI) or a conditional offer to buy (COB) directly through Robinhood or SoFi, and they can request shares conditionally through Fidelity, Charles Schwab (NYSE: SCHW), or E*TRADE by Morgan Stanley (NYSE: MS).
None of these companies guarantees that the stock will be available for purchase at the IPO, though the high percentage of shares set aside for retail investors increases the odds of success. For those who are approved, the platforms discourage “flipping,” or selling immediately. Although it’s allowed, flippers may be blocked from some IPO access if they sell within 30 days of the offering.
A soaring stock price
Once the IPO occurs, SpaceX stock will be tradable on the open market like any other stock, and volatility could be high. Investors who aren’t able to buy at the IPO price might jump in at the opening, and the hype surrounding it raises interest. That would raise the price as well, and it could jump pretty high on the first day of trading.
Management has noted that the high percentage of retail interest can boost volatility, since investors may trade on hype rather than fundamentals.
