SpaceX’s Record Nasdaq Debut Redefines Wall Street Mega IPO Strategy
SpaceX’s Historic IPO and Its Impact on Wall Street
By Anirban Sen, Nivedita Balu and Saeed Azhar
Setting a New Template for Mega IPOs
NEW YORK, June 12 (Reuters) - A collective sigh of relief swept across Wall Street after trading for SpaceX’s landmark Nasdaq launch went smoothly, setting a new template for the trading firms and exchanges that are bracing for the giant IPOs of OpenAI and Anthropic later this year.
Record-Breaking Debut and Market Concerns
SpaceX's record-breaking debut on Friday dwarfed the previous largest flotation on U.S. exchanges by nearly three times. The sheer size of the launch had worried market participants who had lingering bad memories from the disastrous stock market debut of Facebook in 2012.
Robust Trading Systems and Market Infrastructure
However, trading systems at the banks underwriting the IPO, exchanges, market makers, clearinghouses, and other market infrastructure firms held up to the challenge of processing millions of client orders.
Industry Reactions and Comparisons to Facebook IPO
"People go back to the Facebook ... days and 'was this going to turn into one of those companies,' but I honestly think the banks in the U.S. did a fantastic job, the SpaceX crew did a fantastic job telling the story when they did their rounds. And as you can see it went extremely smoothly," said Jeff Parks, CEO of Canadian investment firm Stack Capital Group. Nearly a third of Stack's portfolio is SpaceX, in which the company began investing in 2021.
He was referring to the turbulence that surrounded Facebook's ill-fated IPO, when technical problems turned a landmark listing into one of Wall Street's most notorious trading fiascos. It left investors and brokers in limbo for hours and ultimately cost market makers hundreds of millions of dollars.
Unprecedented Retail Activity and Key Players
According to Citadel Securities, the largest U.S. retail market maker, SpaceX's debut generated the highest retail order activity for an IPO auction ever. A Citadel Securities spokesperson said the firm handled the majority of the retail orders for SpaceX.
Morgan Stanley’s Role as Stabilization Agent
Morgan Stanley, the so-called "stabilization agent" for the glitzy market debut, had the key role in managing SpaceX's market opening. The bank had to ensure an orderly rollout even as it grappled with unprecedented investor demand. A stabilization agent typically buys up shares in the open market to shore up stocks that witness steep declines on opening day.
Behind-the-Scenes Efforts by Underwriters
One of the lead underwriters advising SpaceX, who requested anonymity as the matter is confidential, said the IPO was a monumental event for the exchanges and the banks and crucial to get right.
Trading Volume and System Preparedness
Trading platform Charles Schwab said it has seen well over a million orders in SpaceX in the first few hours of trading, which is a significant figure in comparison to past IPOs, according to a spokesperson for the company.
Reuters reported on Thursday that Wall Street traders, brokers and exchanges had been stress-testing their trading systems for several weeks leading up to the blockbuster IPO.
Market Performance and Volatility
SpaceX shares "are not going up in huge blocks, but they're bleeding higher, and a lot of that is due to a little bit more of a boring and softer opening print than a lot of folks expected," said Mike Dickson, head of research & quantitative strategies at Horizon Investments. "I'm a little surprised there's not more volatility, given a lot of the oversubscription headlines."
Smooth Rollout Compared to Past IPOs
Efficient Opening and Technical Stability
Past trading debuts for large IPOs have often faced delays because exchanges must match enormous volumes of buy and sell orders before determining an opening price. For SpaceX, the stock started trading shortly before noon on Friday. That was relatively early compared to the recent IPOs of Cerebras Systems and Quantinuum, which opened later in the afternoon on their respective debut days.
Minimal Technical Glitches and Collaborative Preparation
Barring some issues with early trading on Robinhood on Friday, Wall Street largely skirted the technical glitches that hampered Facebook's rollout in 2012 - much to the relief of Nasdaq, the market makers, and investors.
"We all worked really well together. We did a lot of preparation with our banking partners," said Nasdaq CEO Adena Friedman in an interview with CNBC on Friday. "We made sure that we were talking to all of the firms throughout the process of preparing for this, and it came off really flawlessly."
(Reporting by Anirban Sen, Saeed Azhar and Caroline Valetkevitch in New York and Nivedita Balu in Toronto; Additional reporting by Echo Wang in New York and Manya Saini in Bengaluru; Editing by Megan Davies and David Gregorio)
