European retail investors are among those jockeying for part of the much-anticipated SpaceX initial public offering, but some observers warn that the deal could prove too difficult for those without the resources of institutional investors behind them. SpaceX is looking to allocate up to 30% of the deal – an unusually large retail range – to individual investors, with offerings planned in the UK, Germany, Denmark, France, the Netherlands, Norway, Spain, Sweden and Switzerland.

In Britain, eight online investing platforms have begun inviting UK customers to apply for shares in a $75 billion raise, seen as the country’s most significant retail offering since the flotation of then-state-owned Royal Mail in 2013, and a chance to regenerate a frugal investment culture.

“The retail interest here is unlike any other deal, investors want to be part of the dream,” said Yagal Al Harar, global head of equity capital markets, technology at BNP Paribas.

European IPO issuance has declined since 2021 and the proportion of household wealth held in financial securities is just 17%, according to the European Union, a figure as low as 43% in the United States. Three academics and a consumer rights advocate advised caution due to loss-making SpaceX’s $1.75 trillion valuation, while a float size of less than 5% and lack of voting rights could pose risks. SpaceX did not respond to a request for comment. Its founder and leader Elon Musk said Thursday that he felt “pretty good” about the company’s revenue projections and that revenue had become “much more predictable.”

Lift off

Opinion on investment forums and platforms such as Reddit is mixed, with some enthusiastic and some put off by the high valuation or Musk’s leadership.

Hargreaves Lansdown said 35,000 of its clients had registered interest in IPO alerts since SpaceX’s offer was first rumored in April.

Revolut’s dedicated webpage for share sales in Britain, aimed at signing up new customers, shows a full-page video of a SpaceX rocket lifting off before outlining the risks of not receiving any shares to applicants.

Mazian Lesfer, professor of finance at Bayes Business School in London, said that while institutional investors have databases and financial analysts to help them determine the true value of a company, retail investors may be taking on “too much risk”.

“It’s a company that’s making huge losses and at the price it’s coming to the market, it’s 100 times sales, which is extremely high…usually around two to three times is pretty good.” The CEO of JPMorgan, one of the huge syndicates of banks working on the IPO, said it would “treat individual investors the same way institutions are treated”.

precedent setting

UK-based Marex Financial operates a public offer platform where eight retail platforms – including AJ Bell, CMC Markets, eToro, FreeTrade, Interactive Brokers and Interactive Investor – can send orders from potential investors.

Mike Combs, chief operating officer of British retail investment platform PrimaryBid, said the new approach could set a precedent for other overseas companies targeting UK shoppers.

An executive at a retail platform said it is encouraging that everyday investors are getting early access to IPOs instead of only being able to buy shares in the secondary market.

eToro said in a press release that the minimum application on its platform was $750, while Hargreaves Lansdown asked for £1,000 ($1,334).

BNP Paribas’ Al Harar said retail participation in IPOs is a new craze for technology companies that may have shifted from keeping a maximum of 15% of their order book to such investors, to double that.

While there has been a regulatory push in the UK to make it easier for retail investors to buy into IPOs, new listings have a shortage of deals to choose from amid a global slowdown. Of the 15 largest UK IPOs in 2021, only one included a retail tranche, according to Coombs. It was Deliveroo, which offered retail investors a 50 million pound slice of its £1.5 billion IPO through PrimaryBid. Shares fell as much as 30% on the first day of trading.