Elon Musk fans who haven't been thrilled with their Tesla shares' recent performance finally have something new to look forward to, and it's a doozy: the biggest IPO of all time.
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That's not an exaggeration. With Musk's aerospace company SpaceX officially purchasing Musk's AI company xAI for $1.25 trillion, the markets are bracing for an impending SpaceX IPO, which is expected to value the company at $1.75 trillion, making it the biggest IPO in history.
But that number could be a bit misleading. Here's what the IPO means for Musk fans, Tesla shareholders, and investors of all types.
Image source: Getty Images.
How big is big?
The current recordholder for the largest IPO of all time is state-owned oil company Saudi Aramco, which isn't traded on U.S. exchanges. When it went public in 2019, it raised $25.6 billion in its IPO. But don't compare that number to $1.75 trillion: the dollar amount of an IPO isn't the same as the company's market cap at the time of its IPO.
Every company about to go public already has shareholders: corporate insiders, venture capitalists... basically anyone who privately took a stake in the company before it went public, and their shares won't be up for sale. Instead, the IPO "amount" is the total dollar value of the shares being offered for sale to the public, which are a small fraction of the total shares outstanding.
So although SpaceX's expected valuation at the time of its IPO is $1.75 trillion, there won't even be $100 billion in shares up for grabs. Analysts expect more along the lines of $40 billion to $80 billion in shares to be on offer, which would still make it the biggest IPO in history by far. But we won't know for sure until the IPO is almost upon us.
Image source: Getty Images.
How long do we have to wait?
IPO shares don't just magically appear on a stock exchange one day. It takes months of planning.
The first step in the SpaceX IPO would involve the confidential submission of an initial prospectus with the U.S. Securities and Exchange Commission (SEC) for its review. That's the step many investors think happened last week, or will happen this week, now that the SpaceX-xAI merger is complete. However, the SEC may make comments that require numerous amendments in a process that typically lasts about three months. Then the prospectus will go public -- meaning we'll get our first real look at the combined company's financials -- in a weeks-long process known as the "Roadshow."
The official IPO pricing doesn't typically occur until the day before the IPO itself, and SpaceX's official market cap won't be known until the IPO trading is complete and we can all see how many shares are sold, and at what price.
The good news for investors is that we have plenty of time to decide whether we think it's worth it to try to buy SpaceX shares on its IPO date. And the size of the IPO means we don't even really need to pay attention -- it will be big news when it happens.
