Investors will soon have a sense of how SpaceX shares will perform after the largest initial public offering ever — but they may need to wait several hours to get in on the trading action.
Shares of the rocket, satellite internet and artificial intelligence giant will be released for quotation at 9:50 a.m., according to Nasdaq Inc., which operates the stock exchanges where it will trade. While they will be eligible for trading ten minutes later, it would be unusual for the stock to actually open that quickly.
The opening price for an IPO is determined by the so-called stabilization agent, which in the case of SpaceX is Morgan Stanley. Their goal is to balance the supply and demand for shares before setting the opening price. Shares of AI chipmaker Cerebras Systems Inc., which had this year’s second-largest IPO, began trading on their first day just before 1 p.m. in New York.
Ahead of the indication window, pre-IPO trading in derivatives linked to SpaceX were suggesting a gain of between 30% to 50% for the stock. Elon Musk’s company, formally known as Space Exploration Technologies Corp., raised $75 billion in an offering that priced its shares at $135 each.
The first day of trading is often volatile, handing investors sharp gains and occasionally sharp losses. Cerebras shares soared as much as 109% in its debut last month before paring those gains to just 62% at their lowest. Meta Platforms Inc., which was known as Facebook when it debuted in 2012, jumped nearly 20% in its debut, but quickly gave that pop up to close basically flat on the day.
In the event of significant share price volatility after the opening trade, limit up-limit down rules would be triggered to temporarily halt trading. The system “is a volatility management mechanism intended to bring liquidity together to balance supply and demand in moments of volatility in a single stock,” said Scott Bacigalupo, Nasdaq’s Senior Vice President of Capital Formation.
“New IPOs trade within a 10% price band up and down from the official opening price, with bands recalculated every 30 seconds,” he said. If the stock’s bid or offer price is locked at the upper or lower band for 15 consecutive seconds, a five-minute trading halt is triggered.
Beyond the first day, investors will be watching to see whether SpaceX can avoid the stock slump that often follows a megacap IPO. Among 30 major technology IPOs in the past 15 years, the maximum decline averaged 55% in the first year, according to Truist Wealth.
Written by: Matthew Griffin @Bloomberg
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