SpaceX paid Wall Street banks approximately $500 million in underwriting fees for its $75 billion IPO, equivalent to 0.7% of the deal's value. This is one of the lowest rates ever recorded for large-scale IPOs.
Goldman Sachs and Morgan Stanley top the list of underwriters and receive the largest share. However, the low percentage forces banks to seek additional benefits beyond the initial fee.
Record-breaking Capital with preferential underwriting fees.
SpaceX raised $75 billion through the sale of 555.6 million shares at $135 per share. This transaction valued the rocket manufacturer at approximately $1.77 trillion at the time of the offering.
This IPO surpassed the $29.4 billion that Saudi Aramco raised in 2019, making it the largest IPO ever in terms of Capital raised .
The stock surged approximately 19% on its first day of trading, closing at nearly $161. By the end of the day, SpaceX's Capital capitalization had surpassed $2 trillion in its $2 trillion launch .
The guarantee fee fund amounts to approximately $500 million, Chia among 21 guaranteeing banks. At 0.7%, this fee is even lower than the 1.2% that the banks guaranteeing Alibaba received in 2014, which was once the standard for large deals.
Most other listing deals typically incur significantly higher fees. Common fees are around 7% for smaller deals and rarely fall below 1%, even for the largest IPOs.
Despite the low percentage, the total fee amount is still at a record high. This $500 million fund is the largest underwriting fee Wall Street has ever received from a single stock listing.
How SpaceX Chia its IPO fees with banks.
Goldman Sachs and Morgan Stanley each received approximately 20% of the total fees, equivalent to about $100 million. Goldman Sachs held the top position in the prospectus.
Bank of America, Citigroup, and JPMorgan Chase each received approximately $75 million. Smaller members of the underwriting alliance received less than $10 million.
SpaceX also successfully negotiated to avoid paying fees on approximately $11 billion worth of greenshoe options. This clause saved the company tens of millions of dollars.
This profit- Chia arrangement is intended to reward leading banks for their role in valuation, investor referral, and share distribution, especially after the share price opens higher than the offering price.
Why do banks accept thin profit margins?
Despite the relatively small commission, the deal sparked fierce competition among banks. Total bids exceeded $350 billion, with institutional investors placing more than $250 billion. BlackRock alone subscribed for approximately $5 billion.
Low underwriting fees are not unprecedented. Saudi Aramco – in its largest deal previously in 2019 – also paid underwriting banks a total of only $64 million, equivalent to just 0.25% of the funds raised.
Nevertheless, banks still XEM this as a "prize." The ranking and connection to Elon Musk's company are worth far more than the fees, even though the deal has made many employees millionaires .
The real benefits could come from other areas. Transaction fees, lending services, or future advisory contracts – such as a hypothetical merger with Tesla – could all yield far more benefits than the fees just collected.
In particular, Goldman Sachs could see a large influx of transactions as its stock experiences significant volatility in the coming months. Banks also have more opportunities to collaborate with companies within Musk's ecosystem on other deals in the future.
Currently, the 0.7% figure represents Elon Musk's leverage over his record-breaking fortune . The coming quarters will show whether the relationship with SpaceX will yield greater returns than the banks expect.
