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

The Most Anticipated IPO in History

A single public offering is set to eclipse all others, promising to be the largest IPO ever seen. The previous year marked a revival for IPOs, significantly boosting profits for major financial firms and resulting in exceptional bonuses for investment bankers. Now, one upcoming IPO is expected to raise more capital than the combined total of all 90 IPOs from last year, ensuring Wall Street reaps substantial rewards.

SpaceX: The Colossal Contender

The company at the center of this financial storm is Elon Musk’s SpaceX. Its recent all-stock purchase of xAI, the developer behind the Grok chatbot and another pillar of Musk’s tech empire, has dramatically increased its scale. News of a potential SpaceX IPO surfaced in December, coinciding with a funding round that valued the company at $800 billion. Just before its acquisition, xAI had reached a $230 billion valuation after raising new capital.

Investors are now valuing the merged entities at over $1 trillion, but Musk is aiming even higher. Reports from Bloomberg and the Financial Times suggest he is targeting a $1.5 trillion market capitalization for SpaceX, seeking to raise approximately $50 billion to fuel further growth. PitchBook analyst Franco Granda argues that a $1.75 trillion valuation could be justified, particularly given the immense potential of SpaceX’s Starlink satellite business.

Despite these lofty valuations, SpaceX’s financial future remains uncertain. According to Fortune, the company has yet to achieve positive net earnings after 23 years. To support a $1.5 trillion valuation, SpaceX would need to generate profits exceeding those of Berkshire Hathaway to deliver solid returns to shareholders.

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

Massive Fees and the Real Windfall: Underpricing

If SpaceX debuts at a $1.5 trillion valuation, it would become the second-largest IPO ever, just behind Saudi Aramco, which launched at over $1.7 trillion in 2019, and far ahead of Alibaba’s $169 billion offering in 2014.

Raising $50 billion through an IPO would set a new record, according to University of Oklahoma professor Bill Megginson. Adjusted for inflation, this would surpass the previous leader, Nippon Telegraph & Telephone’s $44 billion IPO in 1987, and dwarf other major offerings such as Visa ($27 billion in 2008) and Softbank ($28 billion in 2018). In fact, $50 billion exceeds the combined $44 billion raised by all IPOs last year.

How Wall Street Profits from IPOs

This unprecedented capital raise is expected to deliver record-breaking earnings for Wall Street. IPO proceeds typically come in two forms. The first is the underwriting fee, or “gross spread,” paid to banks for selling shares to institutional investors before public trading begins. Jay Ritter, a leading IPO expert from the University of Florida, estimates that such a large deal would command a fee of about 2%. On $50 billion, that translates to $1 billion in underwriting fees.

Ritter notes that major IPOs usually have two or three lead underwriters, who distribute shares among themselves and a syndicate of around 20 firms. Based on past deals, these lead book runners could claim about 35% of the fees—roughly $350 million—with the remainder shared among the other participants.

Yet, the most lucrative aspect for Wall Street is not the fees, but the gains from underpricing. Underwriters often allocate shares to their top trading partners at below-market prices, creating scarcity and driving up the stock price on the first day of trading. Ritter’s research shows that IPO shares typically rise 19% on their debut, resulting in a one-day paper profit of $9.5 billion for favored investors if SpaceX follows this trend. These initial investors, who are often the banks’ largest clients, usually 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. If there are three lead banks, each could receive up to $120 million in fees plus nearly $1 billion from underpricing, totaling almost $1.1 billion apiece.

Alternative Paths for SpaceX’s Public Debut

While a $50 billion IPO would represent just 3% of SpaceX’s total market value, underwriters often argue that the cost of underpricing—nearly $10 billion in this case—is a small price to pay for building a stable base of institutional investors and securing extensive analyst coverage from participating banks.

Nevertheless, giving up more than $10 billion (including fees) is significant for SpaceX, especially considering its heavy capital expenditure needs. For example, xAI reportedly spent $8 billion on infrastructure in 2025, and SpaceX, as a mass producer of massive rockets, faces even greater costs.

Ritter suggests Musk has two strong alternatives to keep more capital within SpaceX. The first is a “direct listing,” which bypasses traditional underwriting and allows the market to set the opening price based on all interested buyers, not just those selected by the lead banks. While direct listings typically do not raise new funds for the company, 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 all taken this route.

The second option is “limit order book building,” used by DoorDash and Airbnb. Here, institutional investors must specify both the number of shares they want and the price they are willing to pay, which helps reduce, though not eliminate, underpricing.

Alternatively, Musk could leverage the possibility of a direct listing or limit order book to negotiate lower fees and a more accurate market price from underwriters. As Ritter points out, Musk’s reputation for unconventional thinking makes him well-suited to pursue such innovative strategies. Whether he will challenge Wall Street’s norms remains to be seen.

This article was originally published on Fortune.com.