“The ICK”, a term popularized by Gen-Z daters, refers to the loss of romantic interest following minor but embarrassing behavior by a crush. Fans of American high finance may be feeling it. Ahead of SpaceX’s initial public offering (IPO) on June 12, high finance appears to be desperate to woo Elon Musk, the rocketry firm’s owner and the world’s first soon-to-be billionaire. Asset manager Fidelity has reduced its minimum account balance for small investors to participate in the listing from $100,000-500,000 to $2,000. Nasdaq and FTSE Russell will increasingly include SpaceX in their popular stock-market indices.
FILE PHOTO: A 3D-printed miniature model of Elon Musk and the SpaceX logo are seen in this illustration created on January 23, 2025. Reuters/Dado Ruvik/File photo (Reuters)
Few are embarrassing themselves more than America’s investment bankers. Decorative spaceships and banners fill the lobbies of Goldman Sachs and Morgan Stanley. The spire of Bank of America’s Midtown headquarters is illuminated in the image of a rocket taking off. The boss of JPMorgan Chase, who once feuded with SpaceX’s firebrand CEO, has hosted him for a raunchy interview in front of wealthy clients.
If that sounds strange, what bankers are telling investors about SpaceX’s business is just as strange. Goldman Sachs is said to expect revenues from SpaceX’s XAI division, which is also involved in the artificial-intelligence race today, to grow from $3 billion in 2025 to $322 billion in 2030. Morgan Stanley apparently thinks SpaceX could make $3.4 trillion in sales and $2.7 trillion in operating profit (before depreciation and amortization) by 2040, respectively. $19 billion and $7 billion last year.
Sycophancy seems a small price to pay for the hefty fees. SpaceX reportedly aims to provide consultants with perhaps 0.75% of the deal’s proceeds. If it sells $75 billion of stock at a valuation of $1.8 trillion, that would net its bookrunners more than $500 million. This is equivalent to more than 20% of the total income US banks earned last year. Anthropic and OpenAI, two leading AI labs that just filed paperwork for similarly-sized listings, can expect similar chatter.
However, bankers’ fees are very small compared to the size of the deals. Giant listings generally charge lower fees than the long-term average of 7% for all IPOs. Still, anything less than 1% is insignificant. When Goldman Sachs agreed to a 0.75% fee to re-list General Motors in 2010, it was seen as a favor to the US government, which was getting rid of the carmaker after the bail-out.
What’s worse, SpaceX has rendered its bankers impotent by reserving up to 30% of the offering for retail investors and setting its take-it-or-leave-it price at $135 per share. This reduces advisors’ discretion in assigning shares and turns them from power-brokers to utility providers. Who wants to date one of those?
This is quite a change from previous IPO waves, when bankers were masters of the universe. This allowed them to undercut IPO prices, allowing their chosen buyers to benefit from the first-day surge in share prices. The average population decline since 1980 has been 19%. In 1999, compared to the last AI-fueled tech boom today, it reached a record 71%. Issuers had no option but to postpone it. Despite the Chinese walls between banks’ rainmakers and analysts, a cheap IPO on Wall Street was often seen as a way for them to quickly buy coverage (and for issuers’ executives to secure early access to other low-priced listings).
Investment banks maintain a strong hold on IPOs. Options like selling shares directly to buyers without an underwriter have proven messy. After Coinbase, a cryptocurrency exchange, went public in 2021, its shares traded sharply and there have been no such major “direct listings” since. But, as their behavior toward SpaceX shows, Wall Street is having a tough time today. Companies remain private longer than ever before, denying banks the advisory fees and gatekeeping power of banks. Whizzy trading companies siphon off their marketing revenue. Private-credit giants eat up business debt.
If SpaceX’s launch flops – a large research firm’s analysis of SpaceX’s discounted future cash flows arrives at half its target valuation – investment banks will face scrutiny, despite their limited control over the process. Yet even a success will leave them something to think about – and not just because of the bizarre monuments to Anthropic and OpenAI that will soon appear in the lobby like the Colossus of Rhodes. They may have given up control and proven themselves to be less important than they thought. “The Ike” is putting it mildly.
