Morgan Stanley’s brokerage arm E*Trade is in talks with SpaceX to take the primary role in selling the company’s shares to everyday U.S. investors when the rocket maker lists publicly later this year, according to people familiar with the discussions. The potential arrangement would give E*Trade a leading position among retail platforms competing for a relatively small but visible portion of what is expected to be a very large deal.
SpaceX’s anticipated public offering is being positioned as one of the largest IPOs on record. In advance of that listing, SpaceX has been weighing how to allocate shares set aside for retail participation. The company is considering routing a notable share of the smaller-ticket, self-directed retail allocation through Morgan Stanley’s E*Trade platform, which would likely reduce the amount of those shares available to other popular retail brokerages.
Two rival brokerage apps, Robinhood Markets and SoFi, have both pitched to participate in the offering but face the prospect of being largely sidelined, the sources said. Neither firm is tied to the underwriting banks on the deal, and both remain in talks to handle some sales, but SpaceX has at least contemplated excluding them from a larger role.
The discussions are confidential and the participants asked not to be identified. The sources cautioned that arrangements are not final and could change in the coming months as SpaceX finalizes its IPO plans.
As a lead underwriter on the deal, Morgan Stanley is expected to have significant influence over how retail demand is funneled. One of the people familiar with the matter said Morgan Stanley plans to route a sizable portion of the shares earmarked for smaller U.S. retail investors through E*Trade, its in-house brokerage platform. That approach would mirror strategies the bank has used on prior transactions to capture a larger share of retail allocations.
Fidelity is also vying for the opportunity to distribute some of the shares via its trading platform, according to one of the people. Robinhood, Morgan Stanley, SoFi and Fidelity declined to comment. SpaceX did not respond to requests for comment. After initial reporting about these talks, SpaceX founder Elon Musk posted on his social media account that "These reports are false" but offered no further detail.
SpaceX is considering reserving as much as 30% of its shares for retail investors, in part to harness strong demand linked to the company’s founder. Industry practice suggests that a significant portion of any retail set-aside typically goes to private wealth and high-net-worth clients managed by underwriting banks, with a smaller share left for self-directed retail investors who place smaller orders. That smaller-ticket slice is the portion E*Trade, Robinhood and SoFi are competing to service.
Historically, retail investors account for a modest share of IPO order books, often roughly 5% to 10% of total orders, with underwriters concentrating on raising capital from larger institutional investors such as asset managers and hedge funds that place sizable orders. The current negotiations reflect that dynamic and underline the underwriting banks’ leverage in directing retail allocations.
The talks come at a time when brokerages have experienced elevated trading volumes linked to market volatility, boosting activity across retail platforms. E*Trade would gain a significant distribution win if it secures the leading retail role: Morgan Stanley acquired E*Trade in 2020 for $13 billion, and the bank has been pursuing retail distribution as part of a broader strategy to grow that client base alongside its wealth management and investment banking businesses.
Sources noted that while Robinhood and SoFi have been fixtures on high-profile listings in recent years, including large IPOs that routed retail demand through platform partnerships, SpaceX’s allocation decisions could exclude those apps from a major share of the smaller-ticket retail distribution. Arm Holdings and Instacart were cited as past marquee listings where retail-friendly platforms participated prominently.
One additional complexity is that some existing SpaceX shareholders who bought stock in private transactions have concerns about the nature of their holdings, given that a portion of prior trading occurred in opaque secondary markets for private-company shares. That uncertainty over private holdings was reported earlier this month by other outlets and remains a point of attention as SpaceX moves toward a public listing.
What’s next - The arrangements for retail distribution are still being negotiated and could change as SpaceX moves closer to its IPO. Multiple retail platforms remain in discussions about handling portions of the sale, but Morgan Stanley’s E*Trade currently appears to be positioned to take the lead on smaller-ticket U.S. retail orders if those plans are finalized.