A collective sigh of relief
swept across Wall Street after trading for SpaceX’s landmark
Nasdaq launch went smoothly, setting a new template for the
trading firms and exchanges that are bracing for the giant IPOs
of OpenAI and Anthropic later this year.
SpaceX’s record-breaking debut on Friday dwarfed the previous
largest flotation on U.S. exchanges by nearly three times. The
sheer size of the launch had worried market participants who had
lingering bad memories from the disastrous stock market debut of
Facebook in 2012.
However, trading systems at the banks underwriting the IPO,
exchanges, market makers, clearinghouses, and other market
infrastructure firms held up to the challenge of processing
millions of client orders.
“People go back to the Facebook … days and ‘was this going to
turn into one of those companies,’ but I honestly think the
banks in the U.S. did a fantastic job, the SpaceX crew did a
fantastic job telling the story when they did their rounds. And
as you can see it went extremely smoothly,” said Jeff Parks, CEO
of Canadian investment firm Stack Capital Group. Nearly a third
of Stack’s portfolio is SpaceX, in which the company began
investing in 2021.
He was referring to the turbulence that surrounded Facebook’s
ill-fated IPO, when technical problems turned a landmark listing
into one of Wall Street’s most notorious trading fiascos. It
left investors and brokers in limbo for hours and ultimately
cost market makers hundreds of millions of dollars.
According to Citadel Securities, the largest U.S. retail
market maker, SpaceX’s debut generated the highest retail order
activity for an IPO auction ever. A Citadel Securities
spokesperson said the firm handled the majority of the retail
orders for SpaceX.
Morgan Stanley, the so-called “stabilization agent” for the
glitzy market debut, had the key role in managing SpaceX’s
market opening. The bank had to ensure an orderly rollout even
as it grappled with unprecedented investor demand. A
stabilization agent typically buys up shares in the open market
to shore up stocks that witness steep declines on opening day.
One of the lead underwriters advising SpaceX, who requested
anonymity as the matter is confidential, said the IPO was a
monumental event for the exchanges and the banks and crucial to
get right.
Trading platform Charles Schwab said it has seen well over a
million orders in SpaceX in the first few hours of trading,
which is a significant figure in comparison to past IPOs,
according to a spokesperson for the company.
Reuters reported on Thursday that Wall Street traders, brokers
and exchanges had been stress-testing their trading systems for
several weeks leading up to the blockbuster IPO.
SpaceX shares “are not going up in huge blocks, but they’re
bleeding higher, and a lot of that is due to a little bit more
of a boring and softer opening print than a lot of folks
expected,” said Mike Dickson, head of research & quantitative
strategies at Horizon Investments. “I’m a little surprised
there’s not more volatility, given a lot of the oversubscription
headlines.”
SMOOTH ROLLOUT
Past trading debuts for large IPOs have often faced delays
because exchanges must match enormous volumes of buy and sell
orders before determining an opening price. For SpaceX, the
stock started trading shortly before noon on Friday. That was
relatively early compared to the recent IPOs of Cerebras Systems
and Quantinuum, which opened later in the afternoon on their
respective debut days.
Barring some issues with early trading on Robinhood on
Friday, Wall Street largely skirted the technical glitches that
hampered Facebook’s rollout in 2012 – much to the relief of
Nasdaq, the market makers, and investors.
“We all worked really well together. We did a lot of
preparation with our banking partners,” said Nasdaq CEO Adena
Friedman in an interview with CNBC on Friday. “We made sure that
we were talking to all of the firms throughout the process of
preparing for this, and it came off really flawlessly.”