Two people familiar with confidential discussions said Morgan Stanley’s brokerage platform E*Trade is in talks with SpaceX to lead the distribution of shares to individual U.S. investors in the rocket maker’s highly anticipated IPO later this year. The conversations, if they conclude in E*Trade’s favor, would give Morgan Stanley an advantage over rival retail brokerages Robinhood Markets and SoFi in handling the smaller-ticket portion of the offering.
People familiar with the negotiations, who asked not to be identified because the deliberations remain private, said both Robinhood and SoFi had pitched for roles in distributing the IPO to their customers, but SpaceX is considering excluding them from that part of the sale entirely. That would be an uncommon move for platforms that have been prominent in recent marquee listings, even as syndicate banks typically channel much of the retail interest through their own networks.
Morgan Stanley, a lead underwriter on the transaction, is expected to route a significant portion of the shares earmarked for smaller-ticket U.S. retail investors through E*Trade, according to the sources. That approach could limit the share of retail allocation accessible to rival brokerages, as the in-house platform could capture much of the demand from self-directed customers.
Both sources emphasized that discussions are ongoing and subject to change as SpaceX finalizes its IPO plans in the coming months. They also said Robinhood and SoFi — which are not affiliated with any of the banks underwriting the deal — remain in talks to handle some portion of the sales, though those arrangements are not assured.
Mutual fund company Fidelity is also vying for a role in distributing shares on its trading platform, one of the people said. Representatives of Robinhood, Morgan Stanley, SoFi and Fidelity declined to comment when contacted, and SpaceX did not respond to a request for comment.
E*Trade’s potential stake
A leading role in retail distribution would represent a meaningful win for E*Trade. Since Morgan Stanley acquired E*Trade in 2020, the firm has expanded efforts to reach a broader retail clientele, seeking to supplement the bank’s traditional wealth management and investment banking revenue streams. The sources said routing retail allocations through E*Trade would be consistent with Morgan Stanley’s previous playbook on other deals, where the bank has attempted to secure a larger share of retail allocations via its own brokerage platform.
SpaceX’s IPO is expected to be one of the largest public debuts, and the company is reportedly considering setting aside up to 30% of its shares for retail investors to capitalize on founder Elon Musk’s large and enthusiastic following. Within that proposed retail quota, a sizable portion is likely to be allocated to private wealth and high-net-worth clients served by the underwriting banks. The remaining slice - the smaller-ticket, self-directed retail allocation - is the contested portion that E*Trade, Robinhood and SoFi aim to secure for their platforms.
Retail’s place in the allocation mix
Bankers historically focus on raising the bulk of capital from larger institutional investors such as asset managers and hedge funds, while individual retail orders typically make up a relatively modest share of total demand. Retail investors frequently account for around 5% to 10% of IPO orders, according to the sources included in the discussions.
Some investors in SpaceX’s private-market rounds have expressed concerns about the mechanics of their holdings, questioning whether they actually own stock after purchases in opaque secondary markets for private company shares, a separate reporting referenced earlier this month found.
Where negotiations stand
The sources reiterated that plans remain fluid. As SpaceX moves closer to a public debut in the coming months, the final distribution plan for retail shares could shift, including whether non-bank-affiliated platforms like Robinhood and SoFi will retain roles in distributing smaller-ticket orders.
For now, the likely outcome described by the people involved is a significant portion of the retail allocation being funneled through Morgan Stanley’s channels, with E*Trade positioned to receive a large part of the self-directed retail flow should current talks conclude in its favor.
The situation highlights how retail brokerage firms that have recently become fixtures in IPOs may still face displacement when major underwriting banks elect to prioritize their own retail distribution networks.