SpaceX listing puts private share buyers to the test

SpaceX is set to begin public trading at $135 a share in a listing that values Elon Musk’s rocket company at $1.8 trillion. The debut matters beyond its record size because it will test whether some private-market buyers who thought they owned SpaceX stock have any valid claim at all.

Fortune reported that doctors, lawyers, dentists, entrepreneurs and other wealthy investors bought SpaceX interests through a private secondary market before the company listed. Those deals were made through private contracts, often outside public view, leaving buyers exposed to bad paperwork or outright fraud, Fortune reported.

Private deals face a public test

Fortune’s Allie Garfinkle reported that some buyers will learn whether their claimed SpaceX stakes are real only when they try to sell after insider restrictions expire. Until then, the documents they bought may be difficult to verify against the company’s actual shareholder records.

Matt Grimm, a cofounder of defense technology company Anduril, told Fortune that some people who believe they bought into SpaceX may have been cheated. Fortune quoted Grimm as saying that in some cases buyers “literally are being scammed.”

The problem stems from how secondary-market transactions work for private companies. Unlike publicly traded shares, private equity stakes can change hands through bespoke agreements that may involve intermediaries and limited disclosure, according to Fortune. That structure can make it hard for buyers to confirm whether a seller has the right to transfer the stake being marketed.

A record-sized offering

The Financial Times reported that SpaceX’s initial public offering has raised $75 billion. Fortune said the amount could reach $86 billion based on the portion of shares being sold, and demand was three times the available supply.

Fortune reported that Goldman Sachs is the lead bank on the offering. According to Fortune’s Shawn Tully, Goldman won that role after accepting a 0.75% gross spread, described by Fortune as one of the lowest fees on record for such a deal.

Even with the low percentage fee, Fortune reported that the banks could receive an estimated $646 million in total fees because of the scale of the transaction. Goldman is expected to capture the biggest dollar share, Fortune reported.

The listing also stands to create large gains for some SpaceX employees, according to Fortune, including executives and workers in skilled trades. For outside buyers who entered through private channels, the public market brings a different question: whether the ownership they paid for can be recognized and sold.

Bloomberg reported that SpaceX shares were indicated more than 35% higher in private trading ahead of the debut. That activity points to strong appetite for the stock, but Fortune’s reporting shows that enthusiasm in private markets may also have drawn in buyers who lacked the protections of a public exchange.

This story draws on original reporting from Fortune.