Is E*Trade About to Cut Robinhood and SoFi Out of the SpaceX IPO? | The Motley Fool

Elon Musk's SpaceX is set to issue its IPO prospectus either this week or next, and the company is projected to raise a whopping $75 billion in its upcoming public market debut. In a show of appreciation for retail investors' affinity for Tesla, it has been reported that about 30% of that $75 billion in SpaceX stock will be issued to retail investors.

Traditionally, only institutional investors at major mutual funds, hedge funds, and high-net-worth family offices could purchase a newly public company at its IPO price. Often, a newly issued stock rises significantly on its first day of trading, leaving retail investors scrambling to buy more expensive shares. So, allocating 30% of the IPO to retail investors to level that playing field would be a big deal.

But will two of the most popular retail trading platforms be left out?

On Monday, Reuters reported that E*TRADE from Morgan Stanley, a popular retail trading platform acquired by Morgan Stanley in 2020, would take the lead in distributing SpaceX shares to retail investors. Additionally, the report also said that SpaceX was considering cutting popular up-and-coming retail brokerages Robinhood and SoFi out of the loop, even though both had also pitched the company for a small role in distributing IPO shares.

Needless to say, having SpaceX rely solely on a brokerage owned by a major Wall Street investment bank would disappoint retail investors and be very off-brand for Elon Musk. Throughout his career, Musk has cultivated a strong relationship with retail investors and has often preached democratization in everything he's done related to tech and finance.

Fortunately for traders on SoFi and Robinhood, Musk weighed in on these concerns with a simple post on his platform X, formerly known as Twitter, on Tuesday:

While Musk didn't elaborate on exactly which retail brokerages would receive shares or how many, it does appear that at least some will be allocated to the popular Robinhood and SoFi platforms.

Investors should keep an eye out for SpaceX's upcoming investor prospectus and whether the story and financials justify its $1.75 trillion valuation, which has been rumored in the press.

On the other hand, some may merely want to acquire shares based on Musk's reputation as an innovator and SpaceX's reputation as a futuristic space economy leader, ignoring the financials altogether. After all, that's what one of SpaceX's biggest investors did when it invested last summer.