Why Goldman Sachs Stock Popped on Wednesday
Key Points
WSJ reports that Goldman Sachs will lead the SpaceX IPO next month.
Fees on the IPO could exceed $1 billion and will be shared among 21 underwriting banks.
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Goldman Sachs (NYSE: GS) stock closed Wednesday trading up 5.8% -- and within a few bucks of $1.000 a share! -- after The Wall Street Journal reported that Goldman will be named the lead underwriter on SpaceX's upcoming mega-IPO in June.
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What the SpaceX IPO means for Goldman Sachs
Even for a bank as famous as Goldman Sachs, this is quite a feather in the cap -- a PR coup, and a finger in the eye of archrival Morgan Stanley (NYSE: MS) -- which will also be a lead underwriter, albeit it will occupy a less prestigious place on the right side of SpaceX's IPO prospectus.
Prestige value aside, it's also going to be richly rewarding for Goldman. According to a MarketWatch report earlier this week, the SpaceX IPO could be "the biggest underwriting payday ever for an IPO in terms of the total dollar amount."
What the SpaceX IPO means for Goldman Sachs... in dollars and cents
Underwriters often receive fees for conducting IPOs ranging from 4% to 7% of the total monies raised -- although the bigger the IPO, the smaller the fee usually is as a percentage. Historically, the very biggest IPOs have tended to yield percentages closer to 1% to 2%. Still, with the $80 billion that SpaceX intends to raise (giving the company a $2 trillion valuation, even a 1% fee would yield $800 million, and a 2% fee, twice that.
Granted, Goldman Sachs won't get the whole fee. With 20 other investment banks participating, it will have to be share and share alike. Still, as the lead underwriter, a sizable portion of the fee will go to Goldman.
Combine that with top billing on the prospectus, and Goldman investors have reason to cheer today.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.
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