Space X IPO, Musk wants to learn from "Teacher Ma"

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SpaceX is preparing for a listing that may rewrite the history of American IPOs, and the way Musk plans to execute it closely resembles the strategy Alibaba used when it went public in the U.S. ten years ago.

On Saturday, according to The Information citing sources familiar with the matter, SpaceX is discussing splitting IPO underwriting responsibilities among multiple investment banks, instead of using the traditional model of one or two lead underwriters. The banks currently involved in the discussions include Morgan Stanley, Goldman Sachs, Bank of America, Citibank, and JPMorgan Chase, with several international banks also joining the lineup.

This arrangement is highly similar to the parallel structure used by Alibaba in its 2014 $25 billion IPO—which remains the largest IPO in U.S. history to date.

The potential fundraising for this IPO could reach tens of billions of dollars, greatly exceeding most IPO transactions, which is the core reason why SpaceX needs to mobilize such a large banking syndicate. For investors, this means a rare mega tech stock IPO is rapidly taking shape.

Division of labor among banks, each to its task

According to The Information, SpaceX executives have reportedly told relevant parties that the company is considering Morgan Stanley and Goldman Sachs to allocate shares to institutional investors, while Bank of America and Citibank will lead sales to individual investors. JPMorgan Chase is positioned as the overall IPO advisor.

For individual investor channels, Bank of America is expected to cover U.S. domestic investors, while Citibank will coordinate international banks selling shares to overseas individuals. SpaceX has also brought in Barclays, Deutsche Bank, Mizuho, Royal Bank of Canada, and UBS to help tap international investor resources in their respective home markets.

Sources say the related discussions are ongoing, details may change, and more banks are expected to join the underwriting syndicate.

Copying the Alibaba model, breaking with tradition

This parallel structure among banks closely echoes Alibaba’s arrangement when it went public in the U.S. in 2014.

At that time, Alibaba hired Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Citibank as six joint and equal lead underwriters, listed basically in alphabetical order in the prospectus, deliberately downplaying any hierarchy. Each bank was allocated at least one key function—for example, Credit Suisse and Morgan Stanley drafted the main content of the prospectus, while JPMorgan Chase and Goldman Sachs handled issuance structure and communications with existing shareholders.

By contrast, most other major tech IPOs over the past twenty years have used a more traditional approach. For example, Facebook appointed Morgan Stanley as the sole lead underwriter for its IPO. The structure SpaceX is choosing this time is clearly an active adaptation to its massive fundraising needs.

Intense competition for stabilization agent role

Among the many underwriting functions, the position of “stabilization agent” is particularly coveted by banks. According to insiders, Morgan Stanley and JPMorgan Chase are competing for this role, and other banks could also join the race.

The stabilization agent oversees trading in the first few hours after stocks go public and holds the greatest authority among underwriters, bringing additional fees and trading commission revenues for participating banks.

Specifically, this agent has the right to decide whether to buy additional shares in the public market to prevent share prices from dropping below the issue price. The agent also has control over the exercise of the over-allotment option (green shoe option)—that is, purchasing extra shares beyond the original issue to meet excess demand. The competition for this position reflects the enormous appeal the IPO holds for Wall Street banks.

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