Over the last few months, SpaceX has been preparing for its long-awaited initial public offering (IPO). While institutional money managers and company insiders will receive the largest IPO allocations, retail investors are not entirely shut out of the listing.
Through select brokerages partnering with SpaceX's underwriters, everyday investors can request shares during the offering window. Successfully participating in the offering will depend on timing, eligibility, and a thorough understanding of how the IPO process works.
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How does the IPO process work?
An IPO process starts once a company files an S-1 with the Securities and Exchange Commission (SEC). This document outlines a company's business model, financial profile, and underlying risks. Subsequently, the underwriters -- large investment banks -- conduct a roadshow to gauge demand from institutional buyers. This helps them determine an initial price range for the offering.
In the case of SpaceX, the lead underwriters are Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, and JPMorgan Chase. SpaceX is set to list on the Nasdaq exchange under the symbol SPCX. Once the final IPO price is set (expected in early June), shares are allocated to participating firms and accredited investors. A small portion is often reserved for retail brokerages as well. The IPO is expected to take place on June 12.
How can retail investors participate in the SpaceX IPO?
Retail access to SpaceX shares will be available through certain brokerages that have been able to secure allocations from the underwriters.
Charles Schwab (SCHW 0.20%) is one of the major brokerage firms that has secured access to the SpaceX IPO. Clients can participate by visiting the IPO calendar on Schwab's website and submitting a conditional offer to purchase (COTP) during the open window. The COTP window is typically before 4 p.m. ET the day before pricing. Once the IPO price is finalized, investors must affirm their order by 7 a.m. the next morning. For the SpaceX IPO, investors must have a minimum account balance of $100,000 to participate.
Robinhood Markets (HOOD +3.13%) users follow a similar path through the app's IPO Access feature. Simply search for the SpaceX offering, confirm eligibility, and submit a request for the desired number of shares. Similarly, SoFi Technologies (SOFI +1.82%) users with an Active Investing account can submit a non-binding indication of interest (IOI) in the SoFi IPO Center, answer eligibility questions, and wait for a confirmation notification the day before the listing. Neither Robinhood nor SoFi requires a minimum balance to participate in the SpaceX IPO.
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Is investing in SpaceX risky?
Smart investors need to understand that brokerages can't guarantee their orders will be filled. Allocations are limited, and high-demand offerings usually result in partial fills or sometimes none at all.
Beyond allocation uncertainty, investing in IPOs carries other risks. Newly public companies often experience extreme price swings. Valuation might become inflated by hype-driven narratives, despite the realities of SpaceX's financial profile reflecting a capital-intensive nature. Stocks may surge on their first day of trading only to give back these gains in the following months as lock-up periods expire and early investors cash out.
Broadly speaking, IPOs are speculative and best suited for investors who can stomach outsize volatility. If you are interested in gaining exposure to a SpaceX IPO allocation, it's important to treat the investment as a high-risk, high-reward position within a diversified portfolio rather than a core holding for now. By approaching the process with prudent diligence and realistic expectations, retail investors can participate in the SpaceX offering without overextending themselves.
