The $17 billion mistake hidden inside SpaceX’s blockbuster IPO

The business media and analyst community almost universally hailed the SpaceX debut on June 12 as achieving a kind of triumphal golden mean. The overwhelmingly positive take: The offering managed to simultaneously raise the biggest cash proceeds, and launch the largest valuation for a newly-traded U.S. enterprise ever seen, provide terrific quick gains for institutional and a coterie of anointed retail investors—yet avoid a huge first day pop that would penalize SpaceX by leaving a terribly large portion of the deal’s true value “on the table.”

The absolute dollar amounts that SpaceX (SPCX) sacrificed in going public, however, are staggering and precedent-shattering. Put simply, Elon Musk’s creation stands in urgent need of tens of billions to fund the giant capital expenditures required to power what it acknowledges as its principal growth engine, its new AI franchise. The towering sums that flowed in one-day profits to privileged investors who got shares at the IPO offer price on the cheap—and may reward the bankers who steered them those allocations by sending back lucrative, “soft dollars” trades—would have provided a lot more rocket fuel in the tank to sustain what Musk advertises as the fastest takeoff in the annals of capitalism.

From one viewpoint, the opening jump looks modest. On June 12, SpaceX shares spiked from the offer price of $135 to close at $160.75, a lift of 19%. According to stats assembled by Jay Ritter, the University of Florida professor who is the world’s leading expert on IPOs, the percentage increase precisely matches the average bump over the last several decades. Plus, because the markets valued SpaceX at $2 trillion by the first day close, the amount of “left on the table,” the difference between the total dollars the enterprise would have raised had it captured the $160.75 the funds and folks were willing to pay, and the $135 pre-fee number Musk put in the treasury, tallies to a seemingly non-shocking 0.8% of SpaceX all-in market cap.

Still, the count of foregone billions reigns as by far the biggest in IPO history for ordinary share offerings. Ritter provides extensive rankings for the largest amounts left on the table. His official number for SpaceX is $14.5 billion. But Ritter’s methodology targets the one-day figure. He doesn’t include the “over-allotment,” or “Green Shoe,” of an extra 15% that the issuer awards the banks at the IPO price for distribution to the same investors if the shares rise on day one; if the IPO tanks, the........

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