SpaceX Sets Record-Low Underwriting Fee for IPO, Generates Largest Dollar Fee Bonanza

SpaceX is reportedly set to offer its underwriters a 'gross spread' of 0.75% or less for its upcoming initial public offering (IPO). This fee percentage is noted as tying the lowest on record for a conventional IPO, according to Jay Ritter, a professor at the University of Florida specializing in the field. Typically, IPOs raising tens of billions of dollars see banks receive a larger cut, generally between 1% and 3%. For comparison, the fees for Facebook (2012) and Uber (2019) IPOs were between 1.1% and 1.3%.

Despite the low percentage, the immense size of the SpaceX offering is anticipated to result in the largest dollar fee total for Wall Street. The company has announced plans to sell 555.6 million shares at $135 each, aiming to raise $75 billion and targeting a $1.75 trillion valuation. With an additional 15% over-allotment for investors, the total raise could reach 639 million shares and over $86 billion.

This projected total raise would significantly exceed Alibaba's $25 billion IPO in 2014, which was previously the largest ever mounted on a U.S. exchange. Consequently, the firms distributing SpaceX shares are expected to split approximately $646 million in fees. This figure is more than double the roughly $300 million for Alibaba's IPO and substantially higher than the less than $100 million paid by Uber or the approximately $200 million cost for Meta's public debut.

The roster of underwriters includes prominent firms such as Goldman Sachs and Morgan Stanley, as well as boutique investment banks like Allen & Co. and William Blair, and international banks including Societe Generale, Santander, and Mizuho. Many smaller banks are expected to receive allocations primarily for their retail clients. Banks will split the fees based on the percentage of shares they distribute. Goldman Sachs, acting as a lead underwriter, had previously matched a 0.75% fee for the General Motors IPO in late 2010 to secure the deal.

According to Fortune, banks are also expected to allocate an estimated 30% of their shares to the retail side, a higher proportion compared to the usual 5% or less in most IPOs.