SpaceX Pays $0 On IPO Greenshoe As Bankers Miss Out On $75 Million

SpaceX's record-breaking stock market debut came with another unusual feature that has caught Wall Street's attention.

The Elon Musk-led company negotiated a deal under which investment banks will receive no fees if they choose to exercise the IPO's greenshoe option, a provision that allows underwriters to sell additional shares after the offering.

The arrangement means banks, including Goldman Sachs and Morgan Stanley, could miss out on roughly $75 million in fees, even though exercising the option would allow them to sell an additional $11.25 billion worth of shares.

The listing became the largest IPO on record, surpassing Alibaba's $25 billion offering in 2014. SpaceX raised $75 billion at an offer price of $135 per share.

SpaceX shares opened at $150 and closed at $160.95 on 12 June, up 19.22% from the IPO price. During the session, shares touched a high of $176.52.

Why Is SpaceX Not Paying Fees On The Greenshoe Option?

The unusual provision relates to the IPO's over-allotment option, commonly known on Wall Street as a greenshoe. Under the agreement, underwriters can sell up to 15% more shares than originally offered if demand remains strong. In SpaceX's case, that translates into an additional $11.25 billion worth of stock.

Bloomberg reported that SpaceX will not pay any fees to underwriters if they decide to exercise that option.

The arrangement is notable because banks typically earn additional fees on such share sales. Bankers have up to 30 days to decide whether they want to exercise the greenshoe option.

How Much Did Banks Earn From The SpaceX IPO?

The greenshoe waiver comes on top of an already lean fee structure. Even before negotiating the no-fee greenshoe arrangement, SpaceX had pushed underwriting costs well below levels typically seen in large IPOs.

The company agreed to pay investment banks $500 million for managing the IPO. That amounts to roughly 0.67% of the $75 billion raised.

While the figure appears substantial in absolute terms, it is well below the 4% to 7% fee range commonly charged on IPOs.

Even among large listings, underwriting fees are often above 1%, making SpaceX's arrangement unusual for a deal of this size. As lead underwriters, Goldman Sachs and Morgan Stanley received the largest share of the fee pool, earning roughly $100 million each.

Bank of America, Citigroup and JPMorgan Chase received about $75 million apiece for their roles in the offering. The payout was far smaller for co-managers. More than a dozen banks involved in those roles earned approximately $2 million each.

What Is A Greenshoe Option And Why Does It Matter?

The greenshoe option is a standard feature in many major US IPOs. It allows underwriters to sell additional shares, typically up to 15% more than the original offering size.

The mechanism gives banks flexibility to manage excess demand, helps stabilise trading after listing and can provide the issuing company with an opportunity to raise additional capital if investor interest remains strong.

The term traces its origins to Green Shoe Manufacturing, which became the first company to use the structure during its 1960 IPO.

Also Read - Razorpay Files Confidential IPO Papers With SEBI, Expected Issue Size Around $600 Million

The company also turned the greenshoe concept into a marketing moment. According to reports, Musk encouraged bankers from Goldman Sachs and Morgan Stanley to wear green shoes on the day of the listing. He later shared a photograph showing senior Morgan Stanley executives wearing bright green sneakers to mark the occasion.

Sources:

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