By IPO Edge
IPO Edge Editor-in-Chief John Jannarone joined Schwab Network’s Nicole Petallides on April 9 to discuss how the upcoming mega-IPOs such as SpaceX have required changes to manage the impact of many billions of dollars in stock hitting the market. One transaction potentially happening behind the scenes: Goldman Sachs Group, Inc. has offered investors loans against their privately-held shares of SpaceX so they don’t need to sell them but still want liquidity, according to an investor familiar with the matter. Those loans can help Goldman Sachs, reportedly one of the lead managers on the SpaceX IPO, earn interest income while possibly limiting the impact of share sales on the open market.
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Shareholders tend to have lockups of 6 or 12 months before they are allowed to sell SpaceX shares after the IPO. Some want to hold even longer than that — and even buy more in the IPO — but are sitting on massive paper profits and want liquidity, the person familiar with the matter said. A Goldman Sachs spokeswoman declined to comment to IPO Edge.
Goldman Sachs has discussed offering loans worth up to 25% of the value of the SpaceX shares as collateral, protecting it from losses in any default and even a significant decline in the value of SpaceX, the person said.
The creative solution has come as up to $75 billion of SpaceX stock comes to market including a large retail tranche, reportedly up to 30% of the deal but some say it will be smaller. By contrast, Saudi Aramco the largest IPO in history before SpaceX, was $30 billion in total.
One other possible concern is that retail investors may get their fill from IPO shares, meaning they will show less demand in the open market once the stock begins trading. It is difficult to predict such behavior given the unprecedented scale of the deal.
Another much-buzzed-about innovation is Nasdaq’s decision to allow a much-faster addition of SpaceX to the benchmark Nasdaq 100, which should help provide very significant demand for shares just weeks after the IPO.
To watch the full Schwab interview with Ms. Petallides and Mr. Jannarone, CLICK HERE or watch below.
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