Space X valuation
Elon Musk’s SpaceX has launched the largest IPO in US history. With this, the company raised a whopping $75 billion and instantly became one of the most valuable companies in the world. This rocket manufacturing company on Thursday fixed the price of its shares at $135, sold 555.56 million shares and after this the company’s valuation has reached $1.77 trillion. With this tremendous start, SpaceX has joined America’s largest publicly traded companies. It has overtaken giants like JPMorgan Chase, Berkshire Hathaway, Eli Lilly, Meta Platforms and even Musk’s own company Tesla.
When trading begins on Nasdaq on Friday, SpaceX is expected to become America’s seventh largest listed company. The official name of the company is Space Exploration Technologies Corp. Is. This company has given the banks handling the IPO the option to buy an additional 83.3 million shares at the same IPO price. If this option is fully exercised, the size of the offering will increase from $75 billion to approximately $86 billion.
Demand is more than supply
The interest of investors in IPO has been tremendous. Based on the IPO price, SpaceX’s valuation is approximately $1.77 trillion. When stock options and restricted stock units granted to employees are included, this valuation increases further. According to Bloomberg, the company’s value on a fully diluted basis reaches about $1.8 trillion. This offering has broken the previous global IPO record of Saudi Aramco, which had raised $25.6 billion when it came to the market in 2019. While Aramco’s inflation-adjusted IPO value was about $33.2 billion, SpaceX has more than doubled that figure.
Musk’s SpaceX playbook
Instead of following the traditional Wall Street approach, Musk and SpaceX changed many rules. The company announced the price of its IPO when the US stock market was open. Usually companies avoid doing this because big news or market fluctuations during trading can affect the thinking of investors.
SpaceX informed the investors about the final price as soon as the price fixing meeting with the bankers was over. After this, formal documents were submitted to the Securities and Exchange Commission (SEC) and after about 30 minutes the company issued a press release. Usually, companies wait for the market to close to announce the IPO price. SpaceX also reserved a large portion (30%) of the offering for small investors i.e. retail investors, due to which common investors got a larger stake than usual in big IPOs.
Another differentiator was that the company decided the IPO price even before the traditional roadshow process. Usually in roadshows the company and investors discuss valuation and demand. Musk has prepared a framework to maintain strong control over the company even after listing. Even after the IPO, he will retain 82% voting power of SpaceX.
Retail investors also joined the race
Only the big institutions of Wall Street did not want to participate in this. Individual investors also showed tremendous interest in the offering. According to people with knowledge of the demand, he demanded SpaceX shares worth more than $70 billion. The company also received orders from sovereign wealth funds and large family offices. According to WSJ, one family office alone sought to buy more than $1 billion of shares. However, in such popular IPOs, investors often place much larger orders than necessary because they know that they will get only a part of the shares asked for. SpaceX’s order book closed on Wednesday and the banks handling the offering are now deciding how the shares will be divided ahead of the company’s entry on Nasdaq on Friday. From the beginning, Musk wanted the participation of small investors to be greater. For this reason, the company is planning to give about 30% of the IPO shares to retail investors.
Investors are betting on the future
SpaceX is not profitable at present. Despite this, investors are ready to support the valuation of around $1.77 trillion as they are confident about the company’s long-term future. A major reason for this confidence is SpaceX’s growing Artificial Intelligence (AI) ambitions. The company is basing a large part of its valuation on the prospects of its new AI business. Investors believe that this business can become a big engine of growth in the coming years. The real test will begin on Friday, when investors will get a chance to trade in this stock for the first time. Then it will be clear how much the enthusiasm and discussion about this new venture of Elon Musk proves its historical valuation correct.
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