SpaceX lowballed its bankers on fees. Goldman Sachs has another way to win big

It’s been widely reported that Space X will provide its underwriters a “gross spread” of just 0.75% or less for shepherding the biggest initial public offering of all time. According to Jay Ritter, a professor at the University of Florida who’s the nation’s top academic expert in the field, that number ties the lowest percentage on record for a conventional IPO. Typically, in debuts raising tens of billions, the banks get a substantially larger cut of between 1% and 3%. For context, the figures when Facebook (2012) and Uber (2019) entered the public markets were between 1.1-1.3%. Still, the amount their institutional and retail clients are paying in total for the rocket and AI giant’s shares on offer is so stupendous that Wall Street will still pocket the largest dollar fee bonanza of all time. Ritter recounts the scenario the only other time a U.S. IPO got done at a spread this small. In late 2010, the U.S. government—after bailing General Motors from bankruptcy following the great Financial Crisis—took the auto giant public. “Goldman was competing with W.R. Hambrecht & Co., a firm that proposed auctioning GM’s shares instead of using an underwriting. Its founder Bill Hambrecht told me he offered the Treasury a super-low fee of 0.75%.” As it turned out Goldman Sachs agreed to match that fee to win the deal. Now, Goldman as leader on SpaceX is orchestrating a trophy offering at the same record-thin percentage that’s a good deal for Wall Street simply because the deal’s so immense. Though SpaceX will generate a never-before-seen fount of fees, they’ll still likely furnish a small portion of the most sumptuous total prize Wall Street’s ever seen. And Goldman’s looking to collect the lion’s share. Let’s start with the reward that will be explicitly stated on the prospectus, and gets most of the media attention, that gross spread. SpaceX has already announced in its latest, am