SpaceX’s upcoming initial public offering is set to be the largest stock debut in history, but its sheer size could weigh on investor demand for other initial public offerings, market watchers have suggested.
Samuel Kerr, global head of equity capital markets at MergerMarkets, said SpaceX’s long-awaited listing, scheduled for June 12, comes as the European IPO market struggles to gain traction, in contrast to the “absolutely booming” U.S. market.
With a potential IPO of $75 billion and a potential market valuation of $1.75 trillion, SpaceX’s debut is “out of this world,” Kerr said. Such a listing would “dwarf” other companies that have recently debuted, such as AI chipmaker Cerebras Systems, whose blockbuster IPO last week boosted its market capitalization to about $95 billion.
“This could be negative for the overall global IPO market,” Kerr told CNBC’s “European Early Edition” on Tuesday.
He noted that typical IPOs aim for about 5x coverage prior to pricing, meaning demand for SpaceX’s product would likely need to be “well over” $75 billion.
Carr explained that it can “suck all the oxygen out of the room for other people.” “Everyone’s attention is going to be on SpaceX.”
Given the amount of capital this deal is expected to absorb from the global equity capital markets investor base, investors are likely to allocate large numbers of orders to the listing, so “very few will be willing to go to market at the same time,” he added.
Elon Musk’s company is expected to release its IPO prospectus in the coming days.
“Negative Cocktail”
This groundbreaking debut, and the potential capacity squeeze caused by other blockbuster listings such as OpenAI, further complicates the outlook for the European IPO space, which is already grappling with continued bond market volatility and the prospect of looming interest rate rises.
Kerr said macroeconomic pressures, along with continued uncertainty around the Iran war, the impact on rising supply costs and energy prices, as well as structural weaknesses in the European IPO space (where many new listings underperformed last year), are a “pretty negative cocktail” for the overall market.
“Rising global interest rates are a big problem for the IPO market… Another factor in that negative cocktail is rising bond prices,” he added.
“We never expected the first half of this year to be incredibly busy, but most of what we were hoping for in the first half of this year has been postponed until at least the second half.”
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Looking ahead, Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, warned that a wave of mega-IPOs could temporarily drain liquidity from the broader stock market.
With SpaceX, OpenAI and Anthropic all in that framework, Ahmed said the sheer size of the upcoming trades could trigger a massive “supply event” for stocks, forcing portfolio managers to rebalance their positions and triggering a period of market “dyspension,” especially in a highly concentrated U.S. stock market where a few large-cap winners dominate profits.
“They’re going to have to suck a lot of capital out of the system. So I think that’s another reason why we have to watch out for the winners at this point, because capital is going to be pulled out of there to fund these huge IPOs.”
—CNBC’s Lee Ying Shan contributed to this article.
