High finance is in a frenzy ahead of SpaceX's initial public offering (IPO), with investment bankers abasing themselves to woo Elon Musk, the rocketry firm's boss and the world's first soon-to-be trillionaire. Fidelity has lowered its minimum account balance for small investors to participate in the listing, and Nasdaq and FTSE Russell will fast-track SpaceX into their popular stock-market indices.
Investment bankers are going to great lengths to impress Musk, with decorative spacecraft and banners filling the lobbies of Goldman Sachs and Morgan Stanley. The boss of JPMorgan Chase has even hosted a chummy interview with Musk in front of wealthy clients.
However, the bankers' efforts may be in vain, as their predictions for SpaceX's business are cringe-worthy. Goldman Sachs expects revenue from SpaceX's xAI division to surge from $3bn in 2025 to $322bn in 2030, while Morgan Stanley thinks SpaceX could be raking in $3.4trn in sales and $2.7trn in operating profit by 2040.
The bankers' fees are a pittance compared to the size of the deals, with SpaceX reportedly aiming to offer advisers 0.75% of the deal's proceeds. This is a small price to pay for the fat fees, but it also means the bankers have limited control over the process.
SpaceX has neutered its bankers by reserving up to 30% of the offering for retail investors and setting its own take-it-or-leave-it price of $135 per share. This reduces the advisers' discretion in handing out shares and turns them from power-brokers to utility providers.
This is a change from past IPO waves, when bankers were the masters of the universe. The investment banks maintain their tight grip on IPOs, but companies are staying private for longer, denying banks advisory fees and gatekeeping power.
Even if SpaceX's debut is a success, the investment banks will have surrendered control and shown themselves to be less important than they thought. The "ick" is putting it mildly.
