2 Stocks That Win No Matter What Happens to SpaceX After Its IPO
Written by Reuben Gregg Brewer for The Motley Fool -> SpaceX is holding its IPO, aiming to raise a massive $75 billion. The IPO price is set at $135, but once it starts trading, there's no way to know which way the stock will go. Two companies will win regardless of the stock'
SpaceX is holding its IPO, aiming to raise a massive $75 billion.
The IPO price is set at $135, but once it starts trading, there's no way to know which way the stock will go.
Two companies will win regardless of the stock's direction: Goldman Sachs and Morgan Stanley.
Elon Musk is about to test investors' limits with the initial public offering (IPO) of SpaceX . The IPO price has been set at $135 per share, with plans to sell 555.6 shares. That means the company is raising a massive $75 billion. There is material news flow around the deal, some of it positive and some negative. At this point, there's no way to know if the stock will rise or fall once it starts trading.
There are ways for investors to get exposure to the space sector outside of SpaceX before the company's IPO, if you want to play the potential halo effect across the industry. And Baron Partners Fund has a material investment in the currently private company, with the mutual fund's shareholders standing to benefit if the stock takes off. But there's a risk the shares don't do that, and the IPO halo turns into a crown of thorns for the space sector. The only sure-fire winners in this IPO are likely to be investment banks Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) . Here's why.
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Initial public offerings aren't things that just happen on their own. There is a long list of rules around going public, a complex process that must be worked through to get it done, and Wall Street has to be informed about the company. Getting IPOs over the finish line is a key function of investment banks, which collect handsome fees for overseeing the process.
In the case of SpaceX, the company has chosen Goldman Sachs as its lead investment bank, with Morgan Stanley tagged for a secondary spot. But it's a big deal, so Bank of America (NYSE: BAC) , Citigroup (NYSE: C) , and JPMorgan Chase (NYSE: JPM) are also involved. Goldman Sachs will make the most money from the deal, with Morgan Stanley and the rest coming in behind it. The banking fees will amount to 0.75% of the total raised, according to Bloomberg, or around $500 million. That's actually a relatively low fee percentage-wise for the investment banking services being rendered, but the size of the deal is clearly making up for it.
