SpaceX has completed the largest IPO in history at a $75 billion valuation, with an underwriting fee rate of only 0.67%, totaling approximately $500 million. Goldman Sachs and Morgan Stanley, acting as joint lead underwriters, each received about $100 million in fee allocations.
However, the true gains are expected to stem from ‘soft dollars’—with the stock price rising roughly 20% on the first day of trading, institutional investors saw floating profits exceeding $17 billion. Approximately 30% of these gains will flow back to Wall Street in the form of commissions, potentially exceeding $5 billion, which is eight times the explicit fees. Goldman Sachs is poised to be the biggest winner.
R. Hambrecht & Co. results from proactive price reduction. Today, Goldman Sachs once again leads the SpaceX transaction with the same fee rate, reflecting an identical logic—sufficiently large issuance scale ensures that a thin fee rate still yields substantial absolute revenue. In absolute terms, if the full size of this transaction, including the greenshoe option (approximately $63.9 billion), is considered, the underwriting banks can collectively allocate approximately $646 million in fees—more than double the underwriting fee of Alibaba’s 2014 IPO (approximately $300 million), and significantly exceeding the historical data of Uber (less than $100 million) and Meta (approximately $200 million). The True Gold Mine: Soft Dollars Beyond explicit underwriting fees, a larger source of revenue comes from “soft dollars”—implicit returns delivered to underwriting banks by institutional investors through subsequent trading commissions after receiving IPO stock allocations. Professor Ritter from the University of Florida explains that Wall Street typically prices IPOs slightly below fair market value. Approximately three-quarters of IPOs close above the offering price on the first trading day, with an average first-day gain of about 19%. Of the first-day paper profit, approximately 30% typically flows back to underwriting banks in the form of soft dollars, with the vast majority directed to the lead underwriter. Take a 20% first-day gain in SpaceX’s stock price as an example. Institutional investors receiving allocations would enjoy approximately $17.3 billion in paper profit on the same day, breaking the historical record of approximately $8 billion set by Alibaba during its 2014 IPO. If 30% of the paper profit returns as soft dollars, Wall Street would gain an additional over $5 billion in revenue—approximately eight times the explicit underwriting fee. Says Ritter. Undoubtedly, the largest beneficiary will be Goldman Sachs, as it determines who receives these stocks. Additionally, SpaceX has disclosed in its revised prospectus that it will reserve 5% of issued shares at an offering price of $135 for subscription by company employees, senior executives’ relatives and friends, and business partners. This group is not subject to post-listing lock-up restrictions and can cash out at any time after the market opens. Ritter believes that this arrangement implies that Musk expects a certain degree of stock price increase on the first trading day. Fee Allocation: Lead Underwriters Take the Lion’s Share, Small Banks Receive Approximately $2 Million According to Wall Street Journal, the underwriting syndicate for this SpaceX IPO is extensive. The syndicate spans top-tier investment banks, boutique investment banks, and large foreign banks, including Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, JPMorgan Chase, as well as Allen & Co., William Blair, Societe Generale, Santander Bank, Mizuho Bank, and more than 20 other institutions.
Fees are distributed proportionally based on each bank’s underwriting share: Goldman Sachs and Morgan Stanley, as lead underwriters, each received approximately $100 million. Bank of America, Citigroup, and JPMorgan Chase, playing smaller roles, each received approximately $75 million. In contrast, over a dozen institutions that merely served as co-managers saw their fees drop sharply to approximately $2 million each. Ritter pointed out that joint bookrunners, due to their dominant role in institutional placement, will secure a higher-than-average underwriting share, thus claiming a larger portion of the fee pool. Among the participating institutions, many smaller banks primarily serve retail clients. IPO Pricing and Market Open: Breaking Conventions Until the Final Moment Even in the final stages, SpaceX maintained its unconventional style. During the roadshow, the company did not set an offering price range but directly locked in the pricing after intensive discussions with bankers and investors. According to reports, by Wednesday afternoon, SpaceX had received orders totaling hundreds of billions of dollars. Around 2:00 PM on Thursday, SpaceX executives and bankers held the final pricing meeting. That evening, bankers from Goldman Sachs and Morgan Stanley celebrated with SpaceX executives. Morgan Stanley coordinated the early morning trading on the first day of listing. The stock opened at $150 just before noon on Friday, ultimately closing the first day with a gain of nearly 20%. Musk also requested that bankers and traders from the two lead underwriters wear green sneakers uniformly at the Nasdaq trading floor, as a tribute to the “Greenshoe Option.” He later posted a photo on social media featuring Morgan Stanley CEO Ted Pick and other executives wearing fluorescent green sneakers.
