SpaceX: underwriters fully exercised IPO over allotment option

SpaceX’s underwriters have fully exercised the greenshoe option, also known as the over-allotment option, associated with the company’s record $75 billion IPO. This provision, a standard feature in major U.S. IPOs, allows underwriters to purchase up to 15% more shares at the IPO price to stabilize trading in the early weeks following a stock’s debut. In SpaceX’s case, Morgan Stanley, acting as the stabilization agent, has the right to acquire an additional 83 million shares at $135 per share, bringing the total number of shares potentially issued to 638.9 million.

The greenshoe mechanism serves two primary functions: it provides underwriters with a tool to manage price volatility and offers the issuing company the opportunity to raise additional capital if demand is strong. In this instance, the full exercise of the greenshoe option could generate an additional $11.2 billion in proceeds for SpaceX.

The greenshoe option originated in 1960 with Green Shoe Manufacturing and has since become a key tool for managing post-IPO market dynamics. Similar to Alibaba’s 2014 IPO, where the greenshoe option was fully exercised to manage excessive demand, SpaceX’s move reflects a strategic approach to maintaining orderly trading and maximizing capital-raising potential.