SpaceX is set to generate more capital through its IPO than the total amount collected from all 90 IPOs conducted last year.

The Most Anticipated IPO in History

Financial markets are abuzz with talk of an upcoming IPO that could eclipse all previous offerings. Last year saw a revival in IPO activity, which significantly boosted profits for major financial firms and resulted in generous bonuses for investment bankers. Now, a single public offering is expected to generate more capital than the combined total of the previous year's 90 IPOs, promising even greater earnings for Wall Street.

SpaceX: The Giant Preparing to Go Public

The company at the center of this excitement is Elon Musk’s SpaceX. SpaceX recently expanded its reach by acquiring xAI, the developer behind the Grok chatbot, in an all-stock deal. Reports of Musk’s intention to take SpaceX public surfaced in December, coinciding with a funding round that valued the company at $800 billion. Just before its acquisition, xAI was valued at $230 billion following a new capital injection.

As a result, investors are now valuing the merged entities at over $1 trillion, with Musk aiming even higher. According to Bloomberg and the Financial Times, he is targeting a $1.5 trillion market capitalization for SpaceX, seeking to raise approximately $50 billion to fuel further growth. Analyst Franco Granda from PitchBook suggests that a valuation of $1.75 trillion is plausible, especially given SpaceX’s expansion opportunities, notably through its Starlink satellite business.

Despite these lofty goals, SpaceX’s financial outlook remains uncertain. Fortune notes that after more than two decades, the company has yet to report positive net earnings. Achieving a $1.5 trillion valuation would require SpaceX to generate profits surpassing those of Berkshire Hathaway to deliver meaningful returns to shareholders.

However, one group stands to benefit handsomely with minimal risk: the Wall Street banks managing the IPO.

Massive Fees and the Real Profits Behind the SpaceX IPO

If SpaceX achieves a $1.5 trillion valuation, its IPO would become the second-largest in history, trailing only Saudi Aramco, which debuted at over $1.7 trillion in 2019, and far outpacing Alibaba’s $169 billion offering in 2014.

Raising $50 billion would set a new record, according to University of Oklahoma professor Bill Megginson. Adjusted for inflation, SpaceX would surpass Nippon Telegraph & Telephone’s $44 billion IPO in 1987, and overshadow other major offerings like Visa ($27 billion in 2008) and Softbank ($28 billion in 2018). In fact, $50 billion exceeds the total $44 billion raised by all 90 IPOs last year.

Wall Street’s Windfall: How the Money Flows

This unprecedented capital raise is expected to deliver record profits to Wall Street. IPO proceeds are distributed in two main ways. First, banks earn underwriting fees—known as the “gross spread”—for selling shares to institutional investors before public trading begins. Jay Ritter, an IPO expert from the University of Florida, estimates that a deal of this size would carry a fee of about 2%. That means banks would earn $1 billion for placing $50 billion worth of stock.

Typically, two or three banks act as “lead underwriters” or “lead book runners,” allocating shares among themselves and the broader syndicate, which can include up to 20 firms. Ritter estimates that SpaceX’s lead book runners could receive around 35% of the fees, or roughly $350 million, with the remainder split among the other participants.

Yet, the real financial windfall comes from underpricing. When shares are offered at a discount, select institutional investors benefit from the immediate price jump once trading begins. Underwriters often allocate shares to their largest trading partners at below-market prices, creating scarcity and boosting profits for investment banks.

Ritter’s research shows that IPOs are routinely underpriced, with shares rising an average of 19% on the first day. If SpaceX follows this trend, Wall Street’s clients could see a one-day paper profit of $9.5 billion. These investors typically return about 30% of their gains to the book runners through future business. For SpaceX, this could mean an additional $3 billion for the lead underwriters. Assuming three lead banks, each could earn up to $120 million in fees and another $1 billion from underpricing, totaling nearly $1.1 billion per bank.

Alternative Paths for SpaceX’s Public Debut

SpaceX’s planned $50 billion raise represents just 3% of its projected market value. Underwriters often argue that the cost of underpricing—almost $10 billion in this case—is a small price to pay for securing a stable base of institutional investors and extensive research coverage from brokerage firms.

Nevertheless, giving up over $10 billion (including fees) is significant for SpaceX, especially considering its substantial capital needs. xAI reportedly spent $8 billion on equipment in 2025, and SpaceX, as a mass producer of massive rockets, faces even greater manufacturing expenses.

Ritter suggests Musk has two strong alternatives to keep more funds within SpaceX. The first is a “direct listing,” which bypasses traditional underwriting and lets market makers set the opening price based on all incoming orders, not just those selected by lead book runners. While direct listings allow existing shareholders to sell, the company itself doesn’t raise new capital. However, Musk could follow up with a secondary offering at a higher price, minimizing money left on the table. Companies like Spotify, Palantir, and Coinbase have used this approach.

The second option is “limit order book building,” used by DoorDash and Airbnb. This method requires institutional investors to specify both the number of shares and the price they’re willing to pay, rather than simply requesting shares. While it doesn’t eliminate underpricing, it can significantly reduce SpaceX’s costs.

Musk could also leverage the possibility of a direct listing or limit order book to negotiate lower fees and secure a price closer to market value from underwriters. As Ritter notes, Musk is known for unconventional strategies and may well pursue a non-traditional route for SpaceX’s IPO. The world will soon see if he’s ready to challenge Wall Street norms.

This article was first published on Fortune.com