SpaceX on Thursday
priced the biggest-ever U.S. initial public offering at $135 per
share, making Elon Musk’s rocket and spacecraft manufacturer one
of the world’s most valuable companies.
The IPO raised a record $75 billion on the sale of 555.56
million shares, valuing the space, satellite and AI provider at
$1.77 trillion, a record for an initial offering. Reuters
reported last week that the firm was setting the price at $135.
Thursday’s pricing caps off a months-long effort that realized
Musk’s most ambitious project yet even as he stood a handful of
financial traditions on their heads, and as some analysts
question whether its lofty valuation is justified.
SpaceX will rank seventh among U.S.-listed firms when its shares
begin trading on the Nasdaq on Friday, though it lost money last
year and other mega-caps far outpace its revenue.
That values the company more highly than firms as varied as
JPMorgan Chase, Berkshire Hathaway and Eli
Lilly, as well as tech giants such as Meta Platforms
and Musk’s own Tesla.
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“The real test will be how the market digests the IPO over
the next several weeks, not just one day,” said Adam Sarhan,
chief executive of 50 Park Investments in New York. “The pricing
came in just about right – not too hot, not too cold. Clearly
retail investors are buying and, at this stage, they are a big
component of this. We need to see follow-through after the first
day of trading.”
The sale breaks the previous record for the largest-ever IPO
held by state-run oil giant Saudi Aramco, which raised $25.6
billion on Riyadh’s exchange in December 2019, valuing it at
$1.71 trillion. In inflation-adjusted terms, Aramco raised $33.2
billion for a $2.21 trillion value.
SpaceX’s $1.77 trillion valuation, based on 13.08 billion shares
outstanding, could rise further should the underwriters exercise
their right to sell additional shares, a decision typically made
within 30 days after the offering. Reuters reported previously
that SpaceX was seeking a $1.75 trillion valuation.
The company communicated the IPO price just after 3 p.m. EDT
(1900 GMT), when its pricing meeting with bankers concluded and
U.S. markets were still open, in a “free-writing prospectus”
filed with the Securities and Exchange Commission.
SpaceX issued a press release half an hour later. Typically,
the pricing meeting and the announcement of the IPO price take
place after regular trading closes at 4 p.m., because securities
issuers are wary of price-moving macroeconomic or news events
affecting a share sale during regular trading.
The communication is the latest example of Musk executing the
most ballyhooed Wall Street debut on his own terms. SpaceX set
aside 30% of shares for retail buyers, an unusually large
number, and decided on Thursday’s offering price before the
roadshow that bankers and investors have long used to negotiate
IPO terms.
“The SpaceX pricing is really in uncharted territory. I’ve
never seen the price announced instead of the normal process of
price discovery based on orders,” said Rick Meckler, partner at
Cherry Lane Investments in New Vernon, New Jersey. “There’s such
an emphasis on retail which is probably a little indifferent to
the pricing.”
Musk also pushed, with mixed results, for early index inclusion
that would create a broader base of buyers of SpaceX stock, and
structured the company’s governance to preserve strong founder
control. Musk will hold 82% of SpaceX’s voting power after the
IPO.
The U.S. IPO market is set to rebound sharply this year after an
earlier bout of volatility. Goldman Sachs has forecast proceeds
could quadruple to a record $160 billion in 2026, driven by a
pipeline that includes not just SpaceX, but also artificial
intelligence companies OpenAI and Anthropic.
SPACEX REVENUE DEPENDS ON STARLINK
SpaceX said last week it has entered into a multiyear cloud
services agreement with Alphabet’s Google, locking in
computing capacity at a time of increasing competition.
Founded in 2002, SpaceX defines its mission as “to build the
systems and technologies necessary to make life multiplanetary,
to understand the true nature of the universe, and to extend the
light of consciousness to the stars.” SpaceX said its market
opportunity spans $28.5 trillion, a figure it called the largest
in human history.
Its space operation is responsible for more than four-fifths
of the mass launched into orbit over the past three years, it
said, while its Starlink internet unit connects “millions of
consumer, enterprise, and government customers across 164
countries, territories and other markets.” Starlink currently
accounts for most of SpaceX’s revenue.
The lion’s share of its putative addressable market comes
from xAI, which is widely viewed as an also-ran to OpenAI and
Anthropic, though SpaceX says the combination of its AI
computing infrastructure, its model and access to its real-time
data on X “creates a significant strategic advantage.”
“The financial forecasts are uncertain, because of the
reliance on large amounts of government contracts,” said Kim
Forrest, chief investment officer at Bokeh Capital Partners in
Pittsburgh. “People buying the stock are buying into the future
and mankind escaping the Earth – not really investing in a
company.”
The hurdles for the company at its enormous valuation
include efforts by rivals such as Jeff Bezos’ Blue Origin to
accelerate the commercialization of space and pursue government
contracts in a bid to unlock new markets beyond Earth.
Investors will get a chance to see the market reaction
beginning on Friday, when the stock is expected by many analysts
to open in the afternoon, given the size and complexity of the
deal.
“Most IPOs pop in the 10-15% range, and this deal has a lot
of hype, so I think anything less than a 10% return would be
sort of disappointing,” said Matt Kennedy, senior strategist at
Renaissance Capital, a provider of IPO-focused research and
ETFs. “If it pops more than 50%, that tells me it’s trading on
pure hype.”
Goldman Sachs, Morgan Stanley, BofA Securities, Citigroup
and J.P. Morgan are joint book-running managers for the
offering.