- SpaceX negotiated to pay no fees if underwriters exercise the greenshoe option
- The greenshoe option allows selling $11.25 billion more shares without fees
- Goldman Sachs and Morgan Stanley lead the deal with roughly $100 million fees each
SpaceX, which had already negotiated to pay razor-thin fees on its record initial public offering, somehow managed to get an even better deal out of its investment bankers.
Elon Musk's rocket, satellite and AI firm won't pay any fee if underwriters on the offering agree to exercise their ability to sell another 15% of shares, an option known as a greenshoe in Wall Street parlance. The unusual deal means Goldman Sachs Group Inc., Morgan Stanley and the other banks on the offering are missing out on an extra $75 million of fees in the deal.
In the SpaceX deal, the greenshoe option gives underwriters the ability to sell another $11.25 billion of shares. That alone would be a bigger equity raise than the vast majority of IPOs — making the fact that bankers agreed to take no fee for such work all the more striking.
Bankers have 30 days to exercise the greenshoe option. Representatives for Morgan Stanley and Goldman Sachs declined to comment.
ALSO READ: 50% Crash On Cards? Why Morningstar Believes SpaceX Is Worth Only $63 Post IPO
Musk's conglomerate has agreed to pay dealmakers a $500 million fee for the offering, or about 0.67% of the $75 billion IPO haul. Even at that paltry rate, it's still one of the biggest fee-paying events on Wall Street of all time.
As the lead banks, Goldman Sachs and Morgan Stanley took home the biggest share of that fee pool, notching roughly $100 million each.
Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. all had smaller roles in the offering, taking in $75 million each. For more than a dozen banks that only managed to land the role of a co-manager, the fee dropped precipitously to just about $2 million each.
Investment banks typically charge 4% to 7% on IPOs. That fee percentage drops sharply for giant debuts, when banks corral investors to hand over billions of dollars at once. But even in those cases, it's usually more than 1%.
Musk doubled down by pushing his bankers at both Goldman Sachs and Morgan Stanley to don actual green shoes on Friday to mark the occasion. The newly minted trillionaire then posted a photo of senior Morgan Stanley executives, including CEO Ted Pick and Musk whisperer Michael Grimes, showing off their Hulk-colored sneakers.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.