Episode summary
SpaceX Wants Fee Cut From Bankers Chasing $500 Million Windfall | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Sri Natarajan, Matthew Bloxham, Mary Ross Gilbert, Woo Jin Ho
Summary
SpaceX’s planned IPO dominated the discussion, with the host and a guest saying Elon Musk is trying to push banker fees below 0.75% on the $75 billion deal. The guest said the company has the leverage to do that because even a tiny fee would still produce about $500 million for the banks, while the host noted 23 banks have already signed up and pricing could come next Thursday.
The conversation also widened to the crowded market for huge equity raises. The guest said Google parent Alphabet’s $80 billion package could be the largest equity raise ever, and that investors are likely to compare SpaceX, Alphabet, Anthropic and OpenAI as they compete for scarce capital. He said going earlier in the race matters because later issuers risk lower valuations or weaker demand.
Mary Ross Gilbert said Victoria’s Secret’s results showed Hillary Super’s turnaround is gaining traction, with comparable sales up 13% and strength across age and income groups. Woo Jin Ho said Hewlett Packard Enterprise’s blowout results reflect a shift from a cyclical pop to a multi-year AI adoption phase, with strong enterprise demand, a larger backlog, and fiscal 2027 guidance that implies earnings above consensus.
Key takeaways
- The guest said SpaceX is trying to pay less than 0.75% in IPO fees, which would still leave bankers with about $500 million on a $75 billion offering.
- The guest said 23 banks are already signed up for the SpaceX deal, limiting their leverage to push back on fees.
- Matthew Bloxham said Alphabet’s $80 billion raise may be the largest equity raise ever and underscores how much capital is chasing mega-deals.
- Bloxham said Anthropic and OpenAI are effectively in a race, and going to market sooner may protect valuation and demand.
- Mary Ross Gilbert said Victoria’s Secret’s 13% comparable-sales gain suggests Hillary Super’s turnaround is reaching younger and broader-income shoppers.
- Woo Jin Ho said HPE’s AI server demand looks durable, with guidance implying more than $4 in earnings versus consensus in the high twos.
Notable quotes
“But even in most of those cases, almost all of those cases are usually above 1%”
“I think it's definitely right to characterize this as a race regardless of what the companies might say”
“you know, that they're just kind of looking for as much detail as they can get about, you know, the the kind of revenue model”
“I think uh we're starting to shift from a a cyclical upswing to maybe a a a secular uh multi-year uh adoption phase”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m.
Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. And a lot of the outlook on the markets will depend on how this SpaceX mammoth IPO proceeds.
Uh pricing could take place next week and then the stock could begin trading potentially the day after. Shrina Rajin is our chief Wall Street correspondent here at Bloomberg News and he's looking at Paul's favorite angle of IPOs which is banks and banks getting paid to take this company public. And Shri, your reporting has found that Elon Musk is negotiating to to cut down the fees that bankers normally get paid.
What do bankers normally get paid and what does Elon Musk want to pay them?
Look, if you think about it realistically, in some ways, SpaceX is the Walmart of IPOs, right? It has all the pricing power here. It is raising $75 billion.
So, you shouldn't expect a typical IPO fee. And to your question, what a typical IPO fee is, most IPOs generally tend to raise less than a billion dollars, a few hundred million. And the banks would usually charge between 4 to 7%.
But even when we talk about the league of mega IPOs, that fee does get reduced drastically. But even in most of those cases, almost all of those cases are usually above 1%. That was the case with Facebook, Uber, Alibaba.
You have to go back perhaps to 2020 and 2010 and a very unusual public listing of General Motors back in 2010 when the banks agreed to a 0.75% fee on that IPO. largely because the owner of GM at the time was the United States government.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- spacex ipo fees
- alphabet equity offering
- berkshire hathaway investment deal
- victorias secret earnings and outlook
- hewlett packard enterprise ai demand guidance
Companies and tickers mentioned
- GOOGL
- GOOG
- BRK-B
- BRK-A
- HPE
- SpaceX
- Alphabet
- Berkshire Hathaway
- Victoria's Secret
- Hewlett Packard Enterprise
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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