In a move following its record-breaking low underwriting fee for its initial public offering, SpaceX has managed to secure an even more favorable term from its investment bankers.
If the underwriters for this offering agree to exercise the over-allotment option to sell an additional 15% of shares, the rocket, satellite, and artificial intelligence company led by Elon Musk will not be required to pay any fee. This option is commonly known on Wall Street as the "green shoe." This unusual arrangement signifies that Goldman Sachs Group Inc (NYSE: GS), Morgan Stanley (NYSE: MS), and other banks involved in the offering will forgo an additional $75 million in fee revenue from this deal.
In the SpaceX transaction, the green shoe option grants the underwriters the right to sell an extra $11.25 billion worth of stock. This amount alone surpasses the total fundraising of the vast majority of IPOs, making the bankers' agreement to perform this work for no compensation all the more striking.
The bankers have 30 days to exercise the green shoe option. Representatives for Morgan Stanley and Goldman Sachs declined to comment.
The corporate group under Musk's control has agreed to pay the underwriting syndicate a fee of $500 million for this offering, equivalent to approximately 0.67% of the $75 billion IPO fundraising. Even at this exceptionally thin rate, it remains one of the highest total underwriting fee deals in Wall Street history.
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