The price is set, but sales are still up in the air

There is nothing SpaceXIPO’s are normal. The rocket maker aims to raise the total amount of the record, by a wide amount, by a historic amount, and it will be controlled by Elon Musk, who is also the CEO of Teslaanother multi-billion dollar company.

When it comes to stock trading machines, SpaceX is offering a take-it-or-leave-it price of $135, rather than offering a range and pricing based on condition, as is common with IPOs.

But as the stock offering begins on Thursday, some traditions will become familiar to Wall Street. At some point, all of the IPO’s shares – worth $75 billion – must be given to underwriters and asset managers so they can reach their clients before trading begins on Friday.

“Elon dictates the price, and, if you think investors want it, you can check that box,” said Lise Buyer, founder of IPO consultancy Class V Group. “But someone still has to decide where the shares go.”

In a typical offering, the price takes place in the evening before the start of the market. In the weeks leading up to that point, the issuer, along with the underwriters, provides the price and raises it if investors show signs of enthusiasm.

For example, where the artificial intelligence chipmaker Cerebras was preparing for its IPO last month, the company initially said it would sell shares for between $115 and $125 a piece. The following week, it increased the range to between $150 and $160.

The IPO price should reflect how investors feel about the final range, with companies generally preferring to price as high or higher. Cerebras ultimately priced its offering at $185, a sign of Wall Street’s bubbling excitement for a clean-play AI IPO. The stock rebounded at the open the next day, closing 68% higher at $311.

SpaceX goes through the entire construction process.

Heading into its short presentation last week, the company said $135 is the price per share and $1.77 trillion is the expected market cap. That’s for a company that made $18.7 billion in revenue last year and recorded an operating loss of $4.2 billion.

Among the nine billion dollar companies, the smallest in revenue Micron with $58 billion last year, and the least profitable of Musk’s other companies, Tesla, is $3.8 billion by 2025.

“It’s not like investors are doing the math at home,” Buyer said. “There is zero math that makes any sense.”

Because the price is set, Buyer said, SpaceX can start working to distribute shares earlier than usual and not have to wait until the actual price occurs. That can be especially useful because of how many shares need to be distributed.

SpaceX told investors it plans to stop taking orders Wednesday, a day ahead, according to people familiar with the matter who asked not to be identified because the information is confidential. That allows the company and its underwriters to take all of Thursday to plan shares for a record-breaking IPO, one of the people said. That process will often be greatly reduced, with the allocation taking place after the official price has been determined, close to the open market.

SpaceX did not immediately respond to a request for comment.

It is very important that SpaceX exit early because the company wants retail investors to get about 30% of the shares for sale, which would be about $22.5 billion. According to Fidelity, the retail piece is usually between 5% and 10%.

In its prospectus, the names of SpaceX Charles SchwabHonesty, Robinhood, SoFi again Morgan Stanley IE-Trade like other brokerage platforms will make stocks available. The final share of sales cannot be determined until the book is closed.

In Robinhood’s IPO in 2021, the exchange indicated that it wants to sell between 20% and 35% of the shares to retail investors. The share ended up in the lower end of that range, CNBC reported at the time. The stock is down 8% in its debut.

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