Musk Generously Shares the Cake. Why SpaceX IPO Plans to Allocate 30% Share to Retail Investors?

TradingKey - On March 26, Reuters reported that Elon Musk is discussing allocating as much as 30% of the SpaceX IPO to retail investors, a proportion more than three times the conventional level. Typically, public companies only allocate 5% to 10% of IPO shares to retail investors.

The move is reportedly intended to leverage Musk's fervent fan base and loyal supporters to stabilize SpaceX's stock price following its listing.

SpaceX IPO Set to Replicate the Grandeur of Google's Public Debut

With a potential valuation as high as $1.75 trillion, the SpaceX IPO could become one of the largest in history. Rowan Taylor, managing partner of Liberty Hall Capital Partners, a private equity firm focused on aerospace and defense, stated that this event is comparable to Google twenty years ago (GOOG) (GOOGL) when it went public, and market demand for the IPO is expected to be extremely robust.

Reuters reported that Musk communicated this IPO allocation plan to Wall Street through SpaceX CFO Bret Johnsen, but the plan has not been finalized and is subject to change.

Previously, tech media outlet The Information reported that the retail share could exceed 20%; Reuters now reports that 30% may be the upper limit target.

The expectation that retail investors will stabilize the stock price stems from Musk's ability to attract a massive base of 'die-hard fans' through his past track record—taking Tesla (TSLA) from a niche electric vehicle brand to mass production and bringing it back from the brink; turning the advanced and costly Starlink into a sustainably profitable satellite network; and leading SpaceX to capture an 80% share of the commercial rocket launch market. Investors are equally confident in the success of Musk's latest IPO.

Currently, Musk has handpicked roles for various investment banks, assembling the most prestigious distribution lineup in history: Bank of America (BAC) will handle domestic retail distribution in the U.S.; Morgan Stanley's (MS) E*Trade platform will target small to mid-sized retail investors; UBS (UBS) will expand into international markets; Citigroup (C) will assist with overseas distribution. Regarding regional markets, Mizuho (MFG) is responsible for the Japanese market; Barclays (BCS) will handle the UK; Deutsche Bank will cover Germany; and Royal Bank of Canada (RY) is responsible for Canada. However, these underwriters have not yet responded.

SpaceX has not yet determined the final offering size or timeline. To date, the record for the world's largest IPO is held by Saudi Aramco, which listed on the Saudi Stock Exchange in 2019 and raised approximately $29 billion. The SpaceX IPO is expected to break this record.