By William Gavin
'It's likely to be the biggest underwriting payday ever for an IPO in terms of the total dollar amount'
Nearly two dozen banks are reportedly working on Elon Musk's rocket launch company's potentially unprecedented initial public offering.
SpaceX's upcoming initial public offering is expected to be out of this world, and some of the biggest beneficiaries will be on Wall Street, the center of the financial universe.
The big investment banks are gearing up for the biggest IPO in history as they underwrite Elon Musk's rocket-launch company.
SpaceX, which reportedly could file its prospectus paperwork this week, is expected to try to raise as much as $80 billion at a valuation of as much as $2 trillion, which would put it solidly in the ranks of the Magnificent Seven, a group of the biggest technology companies. It plans to go public as soon as June 12 and is expected to list on the Nasdaq stock exchange, according to The Wall Street Journal.
When a company decides to make the pivot to go public, it usually hires a team of banks and legal advisors to navigate the complex process. Cerebras Systems (CBRS), which last week became the biggest technology IPO since Uber Technologies (UBER) went public, had a team of 14 banks, according to its regulatory filings. It raised $5.5 billion in its IPO and the 14 banks shared $130.4 million in commissions and underwriting discounts, a regulatory filing shows.
For bankers, SpaceX's IPO will likely be &#34;lucrative,&#34; according to Jay Ritter, a professor at the University of Florida who has earned the nickname &#34;Mr. IPO&#34; for his extensive research.
Read more: Cerebras's stock looks like a risky bet on AI hype
According to PwC, underwriting fees are the largest single direct cost associated with an IPO, with costs typically ranging between 4% and 7% of gross proceeds. While it's unclear exactly how much the banks will make on SpaceX's IPO, the past gives a rough idea of how things could shake out.
Larger IPOs, generally speaking, carry a smaller commission. Visa's (V) $17.9 billion IPO in 2008 carried a 2.8% underwriting spread, while Facebook (now Meta Platforms (META)) paid a 1.1% spread on its $16 billion IPO in 2012, according to Ritter's data.
The average gross spread for an IPO with proceeds of at least $1 billion between 2001 and 2025 was 4.44%, according to Ritter's research. And even a commission of 1% of proceeds on SpaceX's target would come out to $800 million. The banks could potentially share proceeds of $1 billion connected to the IPO.
&#34;Unless it's a much lower percentage spread than that, it's likely to be the biggest underwriting payday ever for an IPO in terms of the total dollar amount that underwriters will be getting,&#34; Ritter told MarketWatch.
At least 21 banks are working on the SpaceX IPO in some capacity, according to Reuters, with Morgan Stanley (MS), Goldman Sachs (GS), JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C) leading the charge.
Morgan Stanley, JPMorgan and Bank of America did not immediately respond to MarketWatch's request for comment. Citi and Goldman Sachs declined to comment.
While impressive, the underwriter fees get split up across the banks and aren't the real money-maker. For banks, the big win comes when they allocate shares to clients, Ritter said.
Companies also tend to underprice their IPO to make sure their shares have a successful launch in the public markets. When a popular company goes public, there's often excess demand for its shares.
That gives underwriters the ability to be &#34;choosy&#34; about who they offer shares to, which incentives banks to allocate stock to preferred - profitable - clients and for clients to overpay on other trades to endear themselves to banks, Ritter explained. There are regulatory rules that mandate investment banks not show favoritism to clients, but there is also a lot of leeway.
If SpaceX is underpriced by just 10%, Ritter said, that's billions in profit for the &#34;people and institutions that are lucky enough to get shares allocated to them.&#34;
There's also the purely reputational aspect. Being able to claim participation in any record-breaking event is a draw for many people, especially when the world's wealthiest man alive is involved.
For larger banks like Morgan Stanley or Goldman Sachs, SpaceX's IPO is likely just another feather in their cap, but for smaller organizations it could be a big deal.
&#34;Being on the cover of SpaceX's [prospectus filing], I mean, who wouldn't want that?&#34; said Scott Liolios, president of Gateway Group, a financial communications firm.
See more: SpaceX and Google may become even more tightly linked through this far-out venture
-William Gavin
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(END) Dow Jones Newswires
05-18-26 0937ET

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SpaceX's upcoming IPO is expected to be the largest in history, potentially raising $80 billion at a valuation of $2 trillion. Nearly two dozen banks, including Morgan Stanley and Goldman Sachs, are involved, with underwriting fees possibly reaching $1 billion. The IPO is set to launch on June 12, and banks may benefit significantly from share allocations, despite regulatory constraints on favoritism.

Dow Jones

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Goldman Sachs

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Morgan Stanley

Cerebras

Uber Tech

Visa

Meta Platforms

JPMorgan Chase

Bank of America

Citigroup

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Alphabet

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MORGAN STANLEY DEP SHS REPS 1/1000 7.125% PFD E

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MORGAN STANLEY 4.875 DEP SHS REP 1/1000 NCUM PFD SR L

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JPMORGAN CHASE & CO. 4.20% DEP SHS REPSTG 1/400TH PFD SER MM

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JPMorgan Chase & Co.

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BANK OF AMERICA CORPORATION 5.875%NON CUM DEP SHS REP1/1000TH SER HH

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BANK OF AMERICA CORPORATION 4.375% DP SH RP 1/1000TH IN NON CU PF NN

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Bank of America Corp

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Wall Street is set to reap a fee bonanza from the SpaceX IPO that could reach $1 billion