The recent Initial Public Offering (IPO) of SpaceX saw overwhelming demand, leading many retail investors to receive only a fraction of the shares they requested. For example, one investor, Marvin Jung, who asked for 1,000 shares, received only 17, and subsequently sold his position. Similarly, Ross Cameron, founder of Warrior Trading, requested 4,250 shares through Schwab but was allocated only 147 shares at the IPO price of $135. Online forums were filled with complaints from investors reporting allocations as small as a single share, despite high demand described as "unprecedented" by Charles Schwab and the largest in SoFi Technologies' history.
SpaceX shares surged 19% on their debut, closing around $161, up from the $135 IPO price, and extended gains to 20% on the following Monday, pushing the company's market value above $2 trillion. Despite this strong performance, some investors like Jung decided to sell quickly, while others like Cameron planned to hold unless prices fell below $150 or reached $200. There is also concern about future selling pressure once lockup restrictions expire, with Cameron expecting a "wave of selling" that current buying might not be able to support.
Prior to the IPO, the private market for SpaceX shares was characterized by intense demand and complex, often opaque, investment structures. Investors like Bhatia, the former CEO of Axiom Space, purchased shares through secondary markets where ownership could be difficult to verify due to multiple intermediaries and layered investment vehicles, some involving up to five layers of brokers and fees. This complexity led to concerns about due diligence, potential fraud, and the possibility of overpaying, with some experts calling the situation "loosey-goosey" and warning about fraudsters emerging.
Namek Zu'bi, who manages a fund with over $500 million in assets, declined requests from his investors to buy into SpaceX deals due to fraud concerns. Mitchell Littman, an attorney advising SPV managers, highlighted the reliance on counterparties' reputations in these transactions. The high demand was often driven by fear of missing out, despite warnings from experts like University of Florida professor Jay Ritter about overpaying and compressed profit margins due to high valuations and multiple layers of fees.
