SpaceX “pressures” Wall Street: IPO underwriting fees may be lower than 0.75%, but investment banks are still expected to rake in $500 million

SpaceX “pressures” Wall Street: IPO underwriting fees may be lower than 0.75%, but investment banks are still expected to rake in $500 million

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SpaceX, owned by Elon Musk, is negotiating with Wall Street banks over the underwriting fee rate for its initial public offering (IPO), aiming to push fees far below industry norms. Even so, the participating banks are expected to collectively earn about $500 million in income, making this one of the largest IPO fee cases in history.

On June 2, citing sources, Bloomberg reported that SpaceX plans to raise $75 billion through an IPO this month and is currently negotiating with underwriters to push the rate below 0.75%. Traditional IPO underwriting fees typically range from 4% to 7%, and even for ultra-large IPOs, rates are generally above 1%.

A total of 23 banks are participating in the SpaceX IPO, with Goldman Sachs and Morgan Stanley serving as lead underwriters, receiving a higher share of the fees than the other 21 underwriters. The aforementioned figures refer only to basic underwriting fees, excluding potential incentive earnings.

After the news was released, market expectations for the revenue from this year’s major IPOs cooled. Artificial intelligence companies Anthropic and OpenAI are both preparing for IPOs, and the industry worries that the low fee set by SpaceX could become a new benchmark, further squeezing Wall Street’s overall profitability during this IPO cycle.

SpaceX leads, ultra-large IPO wave challenges Wall Street

According to sources, one of the lowest underwriting fee rates in record for ultra-large IPOs appeared in 2010 when the U.S. Treasury arranged for General Motors (GM) to go public, with the agreed fee rate exactly 0.75%. At that time, Wall Street was eager to rebuild public trust after the financial crisis, and charging high fees after government bailout would have certainly triggered public backlash.

Bloomberg previously reported that SpaceX’s target valuation is about $1.8 trillion. If the $75 billion fundraising goal is achieved, it will surpass all previous IPOs in terms of amount raised. In addition, SpaceX’s filing on Monday shows that the company will retain up to 5% of shares in this offering for distribution to specific employees and close friends of senior executives.

Meanwhile, artificial intelligence company Anthropic has secretly submitted a draft application for listing, attempting to beat OpenAI in entering the capital market; Alphabet, the parent company of Google, has also announced that it will raise $80 billion through a comprehensive equity issuance plan. The concentration of ultra-large financing cases will jointly test Wall Street’s ability to mobilize public market funds in the short term.

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