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SpaceX is preparing the largest retail allocation ever attempted in a megacap IPO, with Elon Musk seeking to reserve as much as a quarter of the company’s $75bn float for individual investors.
According to people familiar with the move, the billionaire chief wants to place small shareholders near the centre of the rocket and satellite group’s ownership from the outset, reflecting Musk’s longstanding preference for retail investors over Wall Street institutions.
“Elon’s philosophy is all about broad access, that’s why he wants to include retail,” said one of the people.
No previous listing has combined SpaceX’s profile with Musk’s reach. The world’s richest man promotes his businesses to 240mn followers on X, while Starship launches have turned the company into one of the world’s most recognisable private groups.
In large-cap IPOs, retail buyers have historically received 5 to 10 per cent of the shares on offer. The allocation is significant enough that SpaceX took the unusual step of naming the five online brokerages distributing shares in its prospectus.
The company also added a risk disclosure warning that retail participation could drive volatile trading. Reuters previously reported up to 30 per cent of shares could go to retail. The final retail allocation has yet to be set and will depend in part on demand, said people close to the deal.
A new SpaceX IPO website launched Thursday calls retail participation “important” and points investors to brokerages including SoFi, Robinhood, E*Trade, Schwab and Fidelity, where they can subscribe for shares.
“In the past retail participation hasn’t been driven by a lack of demand, it’s been driven by a lack of supply from the issuer,” said Anthony Noto, chief executive of financial super app SoFi. “Retail [has] been somewhat conditioned not to participate because they don’t have access.”
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Noto added that issuers were starting to recognise retail deserved more than a “symbolic allocation” in an IPO as they are a “meaningful source of demand and capital”.
The five online platforms will accept orders from ordinary investors and feed daily demand data back to SpaceX’s underwriters, including Bank of America which is running the US retail portion of the offering.
Absorbing $20bn or more of SpaceX shares should prove manageable for the five digital brokerages, whose platforms collectively hold more than $10tn in self-directed client assets.
Day traders have become a powerful force in US equity markets in recent years, piling into meme stocks, increasingly short-dated options and leveraged exchange traded funds as the S&P 500 and tech-heavy Nasdaq Composite have hit a string of record highs.
“Retail traders are the new price setters in the market,” Citadel Securities’ head of equity and equity derivatives strategy Scott Rubner said in a note this week.
Many gather on Reddit’s WallStreetBets forum, where recent posts from day traders have swung between fear of being left “holding the bag” as SpaceX insiders cash out and an equal fear of missing the trade entirely.
Musk has long courted retail investors. In 2020, he promised on social media to “make sure they get top priority” in any SpaceX listing and at Tesla he remains the only megacap chief executive to reorder earnings calls to prioritise their questions.
That courtship has built an unusually loyal following. Small investors hold about 42 per cent of Tesla’s public float, compared with 34 per cent for Apple, the second-highest of the Magnificent Seven stocks, according to data from S&P Capital IQ. They have, in turn, helped bolster Tesla’s shares, which trade at 382 times trailing earnings, even as growth has slowed.
Some Wall Street investors see the heavy retail allocation as a sign of Musk’s over-reliance on individual fans to prop up the offering.
“Retail is treated like garbage by the rest of the market, there’s an assumption that they’ll buy at any price,” said one manager at a small hedge fund. Still, the manager also said he planned to buy SpaceX shares and flip them into the wave of passive buying on the horizon as major indices added SpaceX.
