There are plenty of true believers in SpaceX.
ARK Invest chief futurist Brett Winton called it “the most important company in the world in terms of what the future is going to look like” in a recent interview with Business Insider. Billionaire Coatue founder Philippe Laffont believes SpaceX will be among the next iteration of the Magnificent Seven stocks. Fidelity’s massive Contrafund values its total SpaceX stake at roughly $8 billion, making it the fund’s fifth-largest exposure, ranking above Alphabet, Microsoft, and Apple.
But the story of the coming IPO of Elon Musk’s rocket company will not be about convincing nervous asset managers of the growth story or pushing longtime fans to double down.
In fact, there might not be much of a story at all. Despite the eye-popping valuation and record fundraise being eyed, the SpaceX road show and initial offering are expected to be straightforward and reasonably drama-free, said three people who work in different parts of the capital markets landscape and are involved in the deal.
The target of $135 a share—instead of a broader range that would get narrowed over the course of meetings with funds in New York, Boston, Los Angeles, and more—is an example of how this road show will more be about going through the motions than actual valuation work by investors, said one banker working on the deal.
In a way, SpaceX is the first IPO that’s too big to fail. Or, put another way, the IPO is so big that it can’t fail.
Major index providers, which control where trillions of dollars of passively managed money flow, have tweaked their rules so the company can be brought into the fold faster than ever, providing IPO backers with an institutional backstop.
While S&P Dow Jones Indices declined to amend its rules to allow faster-than-usual entry into the S&P 500, SpaceX will be quickly added to other major indices.
Nasdaq changed its rules so SpaceX would be able to enter the Nasdaq 100 index in 15 trading days instead of three months. Inclusion in FTSE Russell 1000 could be after just five days of trading, thanks to a late May revision.
“The only thing PMs at the classic anchor investors have to figure out is if they want to be underweight or overweight the company,” the banker said.
“They’ll be invested either way.”
The most comparable IPO, several investors said, was Facebook’s offering in 2012, thanks to its size—it raised more than $16 billion at a $104 billion valuation—and founder-friendly share class structure.
In the 14 years that have passed, investors have only become more accepting of the share class structure, as seen with Musk’s other company, Tesla, and more desperate for tech-related equity offerings. Google’s planned $85 billion fundraise—the first slug of which was oversubscribed—is the latest proof point that asset managers are quick to pounce on any AI-related shares they can get their hands on.
Plus, SpaceX has long history in the private markets. It raised its Series A in 2002 and has been a unicorn since 2010. That means there will be fewer questions about its financials and valuation compared to smaller IPOs, two investors evaluating the deal told Business Insider. The firm’s February merger with xAI provided bankers and investors with additional data points on the company’s valuation, one investor said.
The offering’s unprecedented size is a reason to buy into the deal on its own, said Jay Ritter, a University of Florida professor known as “Mr. IPO” for his work on public debuts.
For investors, “the magnitude of this certainly matters,” he said.
“If this was a run-of-the-mill, $3 billion tech IPO and you didn’t have that in your portfolio, so what?” he said.
But for an offering that will be quickly added to “price-insensitive” indexes and immediately become one of the biggest publicly traded companies in the world, the calculus is different, Ritter added.
“Tech ETFs and mutual funds are going to want that exposure.”
