SpaceX took space investors on a roller-coaster ride last week -- and SpaceX isn't even public yet! SpaceX is, however, rumored to have an IPO prospectus ready. But once it's filed, the story won't end; it will only be beginning.
As The Wall Street Journal explained last week, Elon Musk's "unconventional" plan for IPO'ing SpaceX will roll out in stages -- and may not conclude before June 28, Elon Musk's birthday. (He'll be 55, if you're counting candles.)
Image source: Getty Images.
The beginning of the beginning
Everything kicks off with SpaceX filing a "confidential" IPO prospectus, which was rumored last week and may actually happen this week instead. The SEC may then have questions about the filing, which could undergo multiple rounds of revisions before finally being made public a couple of months from now.
Only then will investors get a clear picture of SpaceX's annual revenue and earnings. (In the meantime, here are my best guesses.)
Run-up to the main event
Publication of the prospectus will precede SpaceX's marketing its IPO to potential investors by about two weeks. The success of this "roadshow" (which in SpaceX's case will involve investors hitting the road to visit SpaceX and tour its facilities, rather than SpaceX going on the road to hype itself) will determine the price SpaceX asks for its shares at IPO.
The main event
This price will be set the day before the actual IPO date. How many shares SpaceX sells at the IPO and the share price it sets will determine both the amount of cash SpaceX raises and the company's initial market capitalization.
As of March 28, the numbers are in flux. Citing the usual "people familiar with the deal," WSJ estimates the IPO will raise between $40 billion and $80 billion, making it the biggest IPO in history. Total market capitalization at the time of the IPO is expected to range from $1.5 trillion to $1.75 trillion.
What happens after the IPO
Whatever valuation SpaceX starts with, Musk is taking pains to ensure it holds on to that price -- and that selling shareholders don't send it into a nosedive. Part 1 of this plan, as we learned earlier this month, is to strong-arm the S&P 500 and Nasdaq-100 indexes into quickly adding SpaceX stock to their holdings. That way, institutional investors who own the indexes won't be able to dump SpaceX stock without also selling everything else in the index.
Part 2, as WSJ reveals, will be to market SpaceX shares heavily to Musk's biggest fans in the individual investor community. Musk may allocate as many as one-third of the shares floated in the IPO to individual investors. He may also encourage Tesla (TSLA +4.52%) shareholders and investors who helped him buy Twitter (now xAI) to participate in the SpaceX IPO.
The reason: Such investors number among Musk's biggest fans, and may be less likely to sell their SpaceX shares for a quick profit after the IPO. Other investors will be asked to agree to six-month and longer lockup periods before they're allowed to sell any shares they buy at the IPO.
If his plans succeed, the SpaceX IPO could begin as a roaring success -- and then rocket even higher.
