{"id":1251,"date":"2026-06-12T08:38:09","date_gmt":"2026-06-12T08:38:09","guid":{"rendered":"https:\/\/crosscountrymovingteams.com\/?p=1251"},"modified":"2026-06-12T08:38:09","modified_gmt":"2026-06-12T08:38:09","slug":"spacex-lowballed-its-bankers-on-fees-goldman-sachs-has-another-way-to-win-big","status":"publish","type":"post","link":"https:\/\/crosscountrymovingteams.com\/?p=1251","title":{"rendered":"SpaceX lowballed its bankers on fees. Goldman Sachs has another way to win big"},"content":{"rendered":"
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Ritter recounts the scenario the only other time a U.S. IPO got done at a spread this small. In late 2010, the U.S. government\u2014after bailing General Motors from bankruptcy following the great Financial Crisis\u2014took the auto giant public. \u201cGoldman was competing with W.R. Hambrecht & Co., a firm that proposed auctioning GM\u2019s shares instead of using an underwriting. Its founder Bill Hambrecht told me he offered the Treasury a super-low fee of 0.75%.\u201d As it turned out Goldman Sachs agreed to match that fee to win the deal.<\/p>\n

Read more Why is it so hard to get ROI from AI? Because building from first principles isn\u2019t easy<\/a><\/p>\n

Now, Goldman as leader on SpaceX is orchestrating a trophy offering at the same record-thin percentage that\u2019s a good deal for Wall Street simply because the deal\u2019s so immense. Though SpaceX will generate a never-before-seen fount of fees, they\u2019ll still likely furnish a small portion of the most sumptuous total prize Wall Street\u2019s ever seen. And Goldman\u2019s looking to collect the lion\u2019s share.<\/p>\n

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Let\u2019s start with the reward that will be explicitly stated on the prospectus, and gets most of the media attention, that gross spread. SpaceX has already announced in its latest, amended S-1 that it\u2019s selling 555.6 million shares at $135 in the underwriting, for $75 billion\u2014and is aiming for a $1.75 trillion valuation, biggest on record. The banks are also getting an extra allocation called an \u201cover-allotment\u201d of 15% in case their investors want more once SpaceX starts trading. Since that additional demand is a virtual certainty, the full raise should come to 639 million shares and just over $86 billion. That\u2019s over triple the $25 billion Alibaba amassed in the 2014 IPO that until now ranked as the largest ever mounted on a U.S. exchange. Hence, the firms distributing the shares will split approximately $646 million in fees. That\u2019s more than twice the roughly $300 million for Alibaba, and dwarfs the less than $100 million Uber paid and the around $200 million cost to Meta.<\/p>\n

The roster of underwriters ranges from such marquee names as Goldman Sachs and Morgan Stanley to boutique investment banks such as Allen & Co. and William Blair to giant foreign universal banks Societe Generale, Santander and Mizuho. All of these participants get shares to distribute. Ritter reckons that many of the smaller banks will get batches only for their retail clients. They\u2019ll still do well. The fees get split according to the percentage of the shares each bank gets to distribute; if your allocation is 5%, you\u2019d receive 5% of the roughly $646 million. Hence, membership in the SpaceX IPO club will bring a nice share of the fees even to the banks that distribute a few points of the total.<\/p>\n

The King\u2019s Ransom will flow from not from fees but \u201csoft dollars,\u201d and Goldman looks to be the big winner<\/h2>\n

Though the gross spread\u2019s rich, the really big money goes to the player who determines which ultra-hungry funds and brokers get the shares. The banks will send a far bigger part of their portions to the retail side than in most IPOs, an estimated 30% versus the usual 5% or less. Among the recipients are Charles Schwab, Morgan Stanley\u2019s E*Trade, and Robinhood. But while all the 23 firms do the distributing, only one bank decides to what clients the vast bulk of the offering will go. And that\u2019s what\u2019s known as the \u201clead left underwriter.\u201d SpaceX displays Goldman Sachs in that position, at the top left on the front page of the IPO prospectus. Just after Goldman on the same top row come the four other \u201cjoint book-running managers,\u201d Morgan Stanley, B ofA Securities, Citigroup, and J.P. Morgan.<\/p>\n

Ritter explains that the joint book-runners will get more than the average percentage of shares to distribute since they dominate the institutional part of the offering, and hence they\u2019ll receive an outsized part of the fees. But they\u2019ll have little say on which hedge and mutual funds, insurers and endowments those shares go to. That\u2019s mainly Goldman\u2019s purview. \u201cGoldman Sachs will allocate the vast majority of the shares on its own authority as lead-left underwriter,\u201d he says.<\/p>\n

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The big question is how much the stock will jump on Day 1. For SpaceX, a good \u201cpop,\u201d though by no means assured, is likely. As Ritter points out, Wall Street makes a practice of underpricing IPOs. Result: Around three-quarters of the offerings end day one above the underwriting price, and the average increase is 19%. The second amended S-1 disclosed that SpaceX has reserved 5% of the shares to be purchased at the offer price of $135 by employees, friends and family of the executives, and people SpaceX does business with. \u201cThat suggests Elon Musk would want a \u2018pop,’\u201d says Ritter. \u201cIf employees immediately lose money in an IPO, they\u2019re not happy campers.\u201d By the way, that privileged group can sell their stock any time, including hours soon after the opening bell rings on the Nasdaq, since they\u2019re exempted from the lock-up provisions that apply to pre-IPO shareholders including Musk and others in the C-suite.<\/p>\n

In exchange for getting underpriced shares, and immediate risk-free gains for their portfolios, the hedge funds and other money managers return part of the bounty to the lead underwriter in what\u2019s called \u201csoft dollars.\u201d That\u2019s officially the amount that the \u201ccommissions\u201d exceed the actual cost of executing the trades. \u201cThe soft dollar amount paid can be multiple the pennies spent on execution,\u201d observes Ritter. Typically, he says, about 30% of the first day profits boomerang back to the bankers in soft dollars, most of the bounty going to the lead left underwriter.<\/p>\n

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Let\u2019s say that SpaceX shares finish their first day $27 or 20% higher, at $162. In a single session, the owners anointed by the underwriters, and chiefly by Goldman, would book profits of $17.3 billion. That would set a record for money \u201cleft on the table.\u201d (The previous record was the $8 billion from Alibaba\u2019s 2014 offering.) If the nearly one-third of the first day bump that\u2019s the norm flows back to the underwriters in soft dollars, the 20% pop in SpaceX could hand Wall Street a windfall of over $5 billion (30% of the $17.3 billion pop). \u201cAnd the biggest beneficiary by far would be Goldman as the lead left underwriter that decided who got the shares,\u201d says Ritter. Big as the fees are, even at that low-sounding percentage, the soft dollar fount is around eight-times larger. \u201cI\u2019m expecting two tremendous quarters in sales and trading for Goldman and maybe Morgan Stanley and others helped by SpaceX, plus the profits from the coming OpenAI and Anthropic IPOs,\u201d says Ritter.<\/p>\n

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AI is disruptive and transformative. But the IPO process doesn\u2019t change, and Wall Street wouldn\u2019t want it any other way.<\/p>\n

Read more SpaceX\u2019s IPO could be largest in history. Here\u2019s how it compares to previous record-holders<\/a><\/p>\n

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