Investors in mainland China and Hong Kong could be shut out of what promises to be one of the most eagerly awaited IPOs in recent memory, following news that SpaceX’s planned IPO worth $75 billion will not take subscription orders from both markets.
In a Tuesday story for Bloomberg, banks involved in the IPO were told not to take orders from investors in mainland China and Hong Kong, even high-net-worth private banking customers, who would typically be able to obtain shares through their respective financial institutions.
The instructions were apparently delivered to underwriters responsible for carrying out the IPO process. The decision was apparently made due to regulations involving sensitive technology in the United States.
While SpaceX is widely known for its commercial rocket launches and ambitious plans for space exploration, the company also operates in areas that overlap with national security, satellite communications, which includes U.S. advanced aerospace technology.
The firm’s involvement in the national security concerns makes it different from just another technology firm IPO. Over the past several years, the U.S. government has tightened oversight around industries considered strategically important, particularly when it comes to foreign access to advanced technologies.
SpaceX IPO more of a geopolitical concern
Industries including artificial intelligence, semiconductors, telecommunication, and aerospace are becoming increasingly intertwined in the context of national security issues. SpaceX falls into a range of those sectors.
Aside from providing satellite and spacecraft launch services, the company runs the Starlink satellite internet service, which has become an essential communication platform globally.
The business is known for working with various government agencies in the United States and defense programs, which makes it one of the most important private businesses in the nation.
Within this context, the restrictions imposed seem to be related to the need to be more cautious when deciding on whom to admit as an investor in such businesses.
On another note, the news also shows just how different global capital markets have become compared to how they used to look decades ago. Previously, there was nothing special about advertising a large-scale IPO to people irrespective of where they came from.
Compliance has become an important factor for the banks involved in the issuance process. In financial institutions conducting large IPOs, regulatory requirements play an essential role, especially with regard to those corporations operating in industries which may raise concerns about potential legal consequences. Restriction on participation from a number of jurisdictions will limit the risks for the transaction.
Though restrictions will inevitably cut out a significant portion of potential investors, they are unlikely to undermine demand for shares. After all, SpaceX is one of the most valuable private companies worldwide and has made a name for itself as a market leader in both commercial and satellite space travel services.
Over the years, the company has achieved a high level of success by developing its launch business and making Starlink an international service. As a result, there is no doubt that a great number of people will wish to buy shares, even without participation from investors in mainland China and Hong Kong.
SpaceX IPO still conflicted on valuation
Despite SpaceX’s market hype, the current IPO is still being put onto a lot of valuation conflict.
As The Coin Headlines reported earlier, Morningstar has questioned the lofty valuation being discussed for a potential SpaceX IPO. While reports suggest Elon Musk’s space and satellite company could aim for a valuation of around $1.75 trillion, Morningstar estimates it is worth about $780 billion.
The number is less than half of the big figure. The investment research firm believes investors may be overestimating the value of SpaceX’s artificial intelligence opportunities.
According to Morningstar, assessing the company’s AI potential is challenging because some of its future growth is linked to Musk’s AI startup xAI and social media platform X, both of which have uncertain business models and financial prospects.
The firm also noted that intense competition from leading AI companies such as OpenAI and Anthropic could limit future growth and profitability.
