SpaceX Stock Starts Trading This Week. Here's What to Expect.
Key Points
SpaceX has allocated as much as 30% of the offering to retail investors, according to reports.
Strong investor interest could send the stock higher at first.
Many recent hyped-up IPOs have dropped after surging.
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SpaceX is slated to be the biggest initial public offering (IPO) ever on the stock market. Management is plans to offer 555,555,555 shares at $135 each to raise $75 billion. To put that in perspective, the most a company ever raised was $26.5 billion by Saudi Aramco in 2019, and the most raised on a U.S. stock exchange was $21.8 billion by Alibaba in 2014.
It's a historic moment, and it's planned for this week. Here's what to expect.
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A lot of retail investing
According to Reuters, SpaceX plans to offer as much as 30% of the share sale to retail investors. It's unusual for any IPO stock to go to retail investors, although it's been happening through online trading platforms like Robinhood Markets (NASDAQ: HOOD) and SoFi Technologies (NASDAQ: SOFI). The company is aiming to raise a lot of money, and it might need the extra demand.
At the same time, it could be tapping into Elon Musk's strong and devoted following. The company says that "at our request," it will offer IPO shares to retail investors beyond the investment banks underwriting the stock. Retail investors can submit an indication of interest (IOI) or a conditional offer to buy (COB) directly through Robinhood or SoFi, and they can request shares conditionally through Fidelity, Charles Schwab (NYSE: SCHW), or E*TRADE by Morgan Stanley (NYSE: MS).
Image source: Getty Images.
None of these companies guarantees that the stock will be available for purchase at the IPO, though the high percentage of shares set aside for retail investors increases the odds of success. For those who are approved, the platforms discourage "flipping," or selling immediately. Although it's allowed, flippers may be blocked from some IPO access if they sell within 30 days of the offering.
A soaring stock price
Once the IPO occurs, SpaceX stock will be tradable on the open market like any other stock, and volatility could be high. Investors who aren't able to buy at the IPO price might jump in at the opening, and the hype surrounding it raises interest. That would raise the price as well, and it could jump pretty high on the first day of trading.
Management has noted that the high percentage of retail interest can boost volatility, since investors may trade on hype rather than fundamentals.
A tumbling stock price
At $135 a pop, SpaceX stock is extremely expensive, trading at about 100 times trailing 12-month sales while the company reports net losses. That's more expensive than artificial intelligence (AI) stock Palantir Technologies, which surpassed that at its peak but currently trades at about 70 times sales while being highly profitable.
Some investors who own shares through private purchases might want to pocket the gains immediately, and investors who buy in for the hype might want to pocket gains quickly, too. The flipping clause is meant to lower the potential for high volatility and reduce retail investor risk.
The historical precedent for hyped-up IPOs is that they fall pretty quickly, even on the first day of trading. Some recent examples of high-hype IPO stocks that soared and dropped include Figma, CoreWeave, and Circle Internet Group. The most recent would be Cerebras Systems, which was priced at $185 at IPO, opened on the market on May 14 at $350, and trades at $201 per share as of this writing.
A strong market response
Many factors can influence how the stock market moves as a whole. Lately, artificial intelligence (AI) has been driving bull sentiment, and the S&P 500 (SNPINDEX: ^GSPC) has been hitting new highs with its heavy AI representation. However, a strong jobs report sent the index back down on Friday, since it signals the likelihood of maintaining high interest rates.
All things being equal, a highly anticipated IPO like SpaceX boosts bull sentiment and market confidence, and the rising tide could lift many other boats.
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Charles Schwab is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has positions in and recommends Figma and Palantir Technologies. The Motley Fool recommends Alibaba Group and Charles Schwab and recommends the following options: short June 2026 $97.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.
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