You probably won’t get rich from the SpaceX IPO

One thing is that The SpaceX IPO seems certain to make a lot of people very rich. The other reason is that you probably won’t be one of them. At least not anytime soon.

There is unusual interest in Elon Musk’s public appearances for rockets and artificial intelligence, and for good reason. SpaceX was already the world’s leading private space company, with its rockets transporting astronauts to the International Space Station, and its Starlink satellites providing internet connectivity to millions of people around the world. Its recent acquisition of xAI means it is also the first of the big three US AI startups to go public, followed by Anthropic and OpenAI. The company raised $75 billion, valuing it at $1.75 trillion, making it the largest IPO ever by a significant margin.

However, like all IPOs, the stratospheric wealth will likely be reserved for those who already own shares in SpaceX, which means employees, major institutional asset managers and Elon Musk. Although so-called retail investors — individuals who don’t buy shares professionally — will have more access to SpaceX shares than is typical in an IPO, most people won’t be in a position to see serious gains.

To be completely clear, this is not investment advice, or a prediction about the long-term financial condition of SpaceX or its stock price. It’s simple mechanics.

“The system is unfair,” says Campbell Harvey, a professor of finance at Duke University’s Fuqua School of Business. Here’s how it works — and who it works for.

Internal path

Typically, the vast majority of retail investors will not be able to participate in an IPO at all. These shows tend to be exclusive clubs, with tightly curated guest lists made up of institutional investors such as mutual funds and asset managers.

However, SpaceX’s IPO is different in some key ways. SpaceX has indicated that it wants to allocate 30% of its “float” (the number of publicly traded shares) to Average Joe, which is worth about $22.5 billion. (A company typically sets aside a much smaller side for retail investors in an IPO, and Fidelity pegs it at 5 to 10 percent.)

Depending on your broker, you may also need much less money to participate. Take Fidelity, one of the world’s largest asset managers. For a typical IPO, Fidelity requires that you have at least $100,000 (or sometimes $500,000) of household assets to participate; For SpaceX, this minimum has been reduced to two thousand.

So, yes, it is easier to be included on the club’s guest list. But there are still too many tables inside. Remember that SpaceX raised $75 billion worth of stock? SpaceX has received $100 billion in orders from optimistic retail investors, Bloomberg reported Thursday. And that’s before you even get to the asset managers trying to intervene; BlackRock alone has reportedly placed an order worth $5 billion.

SpaceX’s bankers ultimately decide who will get the right to buy shares at the IPO price of $135 per share, and for how much of it. The odds of you passing the velvet rope – even with relaxed standards – are very slim. And even if you do, the number of shares you get will likely be a pittance. Tell your brokerage you want 10, and you might be lucky to get one or two. This doesn’t exactly qualify you for generational wealth.

“The average investor gets leftovers,” Harvey says. He argues that even the 30 percent figure is misleading, because SpaceX is only selling 4 percent of its available shares, meaning individual investors will end up owning just over 1 percent of the company after the IPO. “It’s just a few crumbs.”