The massive SpaceX IPO is just around the corner. Investor demand is building, but with hours left to place orders, things could still be going better.
SpaceX plans to sell $75 billion in stock, according to Reuters, but there is demand for $250 billion up from about $150 billion on Monday. SpaceX didn't respond to a Barron's request for comment about the IPO order book.
Now, three-plus dollars in orders have been placed for each dollar of stock to be sold. In Wall Street parlance, that means the deal is currently about 3.3 times oversubscribed.
That's better than two times, from earlier in the week. Still, bankers are probably hoping to reach four or five times oversubscribed. Being oversubscribed is the bare minimum for a successful IPO. It's like a hot stock only meeting Wall Street quarterly earnings estimates. Investors know that companies have to exceed numbers to get a post-earnings pop.
The process of becoming oversubscribed isn't hard to understand. Someone places an order for 100 shares, hoping to get 50 allocated. The banker tells the investor that the deal is super hot. The investor ups their order to 200 shares, still hoping to get 50. That process continues throughout the book-building process.
Exactly what is good for SpaceX is hard to say. The deal is unique. For starters, it's the largest IPO ever, attempting to raise more than twice what oil giant Saudi Aramco raised in 2019. SpaceX is also allocating more shares to smaller retail investors than is typical in most other IPOs.
There are still a couple of days to place orders. The order books should close on Thursday afternoon. The $250 billion in demand won't be the final number.
There are still good odds of a first-day positive post-IPO pop. In early trading on Wednesday, SpaceX share futures were trading at $162 on Hyperliquid, a cryptocurrency platform for trading perpetual futures -- or futures that never expire.
Futures that mirror stock prices don't seem useful, but futures allow for higher leverage than with basic stock trading. For regular investors, think of Hyperliquid as a useful price discovery tool.
The $162 level implies a 20% gain, which would leave SpaceX valued at $2.1 trillion, making it the sixth most valuable company in the S&P 500, ahead of Broadcom.
Exactly what will happen when SpaceX stock starts trading is anyone's guess. Whatever happens, it will be exciting.
