European retail investors are
among those jockeying for a piece of the hotly anticipated
SpaceX initial public offering, but some observers warn
the deal could prove a bumpy ride for those without the
resources that institutional investors have behind them.
SpaceX is considering allocating as much as 30% of the deal to
individual investors – an unusually large retail tranche – with
offerings planned in the UK, Germany, Denmark, France, the
Netherlands, Norway, Spain, Sweden and Switzerland.
In Britain, eight online investing platforms have begun
inviting UK customers to apply for shares in the $75 billion
raise, seen by some as the most significant retail offering in
the country since the flotation of then state-owned Royal Mail
in 2013, and a chance to re-energise a lacklustre investing
culture.
“The retail interest here is unlike any other deal,
investors want to be part of the dream,” said Ygal El Harrar,
BNP Paribas’ global head of equity capital markets, technology.
European IPO issuance has slumped since 2021 and the
proportion of household assets held in financial securities is
just 17%, according to the European Union, a figure dwarfed by
the 43% in the United States.
Three academics and one consumer rights advocate advised
caution due to the lofty $1.75 trillion valuation of the
loss-making SpaceX, while the small float size of less than 5%
and a lack of voting rights could pose risks.
SpaceX did not respond to a request for comment. Its founder and
leader Elon Musk said on Thursday that he felt “pretty good”
about the company’s revenue projections and that revenue had
become “much more predictable”.
LIFT OFF
Opinion on investment forums and platforms like Reddit is
mixed, with some enthusiastic and others put off by the high
valuation or Musk’s leadership.
Hargreaves Lansdown said 35,000 of its clients had
registered an interest in IPO alerts since SpaceX’s offer was
first rumoured in April.
Revolut’s dedicated webpage for the share sale in Britain
aimed at signing up new customers features a full-page video of
a SpaceX rocket lifting off before outlining risks including
that applicants may not receive any shares at all.
Meziane Lasfer, Professor of Finance at Bayes Business
School in London, said that while institutional investors have
databases and financial analysts to help them determine the true
value of a company, retail investors would be taking a “very big
risk”.
“It is a company that is making huge losses and at the price
it’s coming to market, it’s at 100 times price to sales, which
is extremely high…Normally about twice to three times is very
good.”
The CEO of JPMorgan, one of the vast syndicate of banks
working on the IPO, said it was looking to treat “individual
investors the same way institutions are treated”.
SETTING A PRECEDENT
UK-based Marex Financial is operating a public offer
platform where the eight retail platforms – also including AJ
Bell, CMC Markets, eToro, Freetrade, Interactive Brokers and
interactive investor – can send prospective investors’ orders.
Mike Coombes, chief operating officer of British retail
investment platform PrimaryBid, said this new approach could set
a precedent for other foreign firms targeting UK buyers.
An executive at one of the retail platforms involved said it
was encouraging that everyday investors were getting early
access to an IPO rather than only being able to buy shares in
the secondary market.
eToro said in a press release that the minimum application
on its platform was $750, while Hargreaves Lansdown is asking
for £1,000 ($1,334).
BNP Paribas’ El Harrar said that retail participation in
IPOs is a new obsession for technology companies that have
shifted from maybe having at most 15% of their order book placed
with such investors, to double that.
While there has been a regulatory push in the UK to make it
easier for retail investors to buy into IPOs, there has been a
dearth of deals to choose from amid a global slowdown in new
listings.
Of the 15 largest UK IPOs in 2021, only one included a retail
tranche, according to Coombes. That was Deliveroo, which offered
retail investors a 50 million pound slice of its £1.5 billion
IPO via PrimaryBid. The stock plunged as much as 30% on its
first day of trading.