IPO
How Elon Musk’s tactics left investors exclaiming SpaceX stock and ignoring risks
SpaceX is attracting enormous investor demand ahead of its stock market debut, but concerns remain over governance, transparency and valuation. Reuters reports that Elon Musk maintained tight control over who could invest in the company before its IPO, with some investors undergoing interviews and receiving limited financial information. Despite warnings about financial and governance risks, enthusiasm remains high as SpaceX prepares to list at a valuation of about $1.75 trillion. Strong interest from both institutional and retail investors highlights the continued confidence many shareholders place in Musk and his business ventures.
Investor interest in SpaceX stock ahead of its impending IPO is still running hot, but a Reuters report indicates many purchasers are all too happy to ignore dangerous information with regards to the company and its founder. With a price that would hit a market capitalization of around $1.75 trillion, the company is set to be one of the most closely followed public offerings in market history.
In Elon's Case If is More like sans Musk, SpaceX Investors
Acquiring SpaceX shares before the IPO was far from simple, multiple early investors told Reuters.
It said some investors allegedly used personal connections to people close to Musk in order to get an allocation. Even once they were in the door, potential investors had to go to SpaceX HQ and sit for interviews with executives including SpaceX CFO Bret Johnsen.
Notably, investors said that final approval has often come down to Elon Musk himself. Although they put a combined millions of dollars into the company, some investors told reporters on Thursday how they received little more than basic financial details before investing. An investor who bought $10 million of SpaceX shares in 2018 told CNBC that the investment is now worth over $200 million as the company's valuation has ballooned.
What SpaceX is doing to the traditional IPO playbook
SpaceX also handled its IPO process in an unconventional way. Rather than letting banks openly market shares and decide allocations, the company allegedly gave banks investor groups and geographies to work with. Unlike a typical large public listing, however, SpaceX also set an offering price before the roadshow process ended.
Goldman Sachs were among the major financial players involved in the offer along with Morgan Stanley
Among the other important characteristics of the IPO: A significant portion of shares are reserved to retail investors. Reportedly, about 30% of the $75 billion offering has been reserved for individual investors, which points to SpaceX's plans to give back to supporters (both the company and Musk alike).
Dangers in Governance and Finance for Investors
Even with the buzz, some analysts and governance experts have expressed concern over the risks of SpaceX. Musk's outsized influence over the company, weak corporate governance protections, continuing losses and business transactions between Musk's other companies have attracted criticism.
This has also raised quite a few questions about very ambitious long-term projects like colonising Mars and placing datacentres in space, which traditional financial methods struggle to even value.
Tejal Patel, head of corporate engagement at SOC Investment Group, said investors were often forced to pick between governance and financial risks that would usually raise red flags for institutional shareholders.
Demand Remains Strong Despite Concerns
Investor appetite for SpaceX stock, however, appears greater than ever despite these concerns. Analysts working on the IPO reportedly received far more investor inquiries than typical for large offerings. In fact, even some said demand levels were the highest as they have ever seen.
A major reason investors keep pumping money into SpaceX is simply because Musk has a history of building great companies like Tesla. For company supporters, the risk associated with catching the upside far outweighs it. For critics, the IPO is a prominent test of whether investor faith in Musk can continue to trample over fears about governance, transparency and value for money.
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