Retail Investors as Stabilizers: Insights from Rebecca Kacaba on SpaceX’s Upcoming IPO

The countdown to liftoff is on.

SpaceX's IPO is expected to launch this summer, and it's expected to be the biggest one in history.

Now Elon Musk is reportedly pushing for retail investors to receive 30% of IPO shares, which is much higher than the usual 5 to 10% allocation that retail typically receives in public listings.

And that's because Musk prefers a loyal individual shareholder base.

Long term goals like landing on Mars over short term institutional targets.

Now by democratizing the IPO, it could legitimize retail's presence in the biggest capital market moments, but it could also delegitimize retail's expanded access if things go poorly.

One example of this would be a panic selling causes a hit in the historic $1.75 trillion valuation.

Well joining me to weigh in this morning is Rebecca Kacaba, CEO and co-founder of Dealmaker.

Rebecca, Good morning.

Thank you so much for joining me.

There's a lot of anticipation regarding SpaceX's IPO.

The retail allocation could be as high as 30%.

So what do you make of this and do you think it is just a one time Elon Musk phenomenon that is driven by his fan base.

Hey Remy, thanks for having me.

We're thrilled to see this as a provider of retail capital.

The trend line is clear.

Reddit did 8% on their IPO for their users, bullish 20%, Gemini 30%, now SpaceX 30%.

This is clearly part of a trend line that we're seeing where the 10% retail allocation. is dead and everything is creeping up.

Even OpenAI on the pre-IPO round they just closed, they had allocated $1 billion to retail, and they actually got 3 times interest in that from retail.

And if you think about it, there is a broader conversation that's happening around AI and how to involve everyday individuals.

Individuals in that while there's fears about job loss.

And if you think about it, Rockefeller back in the day with the profits of his companies helped to build libraries across America.

And so how can the AI companies do the same thing for people that are supporting their business, they can let them in on the profits of these companies that are being built.

And I do want to ask you about evaluation since there is a real evaluation question around SpaceX now some analysts may point to a price to sales ratio north of 100, but if we investors fall in an IPO as well and the stock is actually underperformed.

What are the implications here and how do you think about the risk that a high profile stumble could potentially affect the company moving forward.

I think there's always a quick, you know, brush to paint that there's something about retail that does this.

In reality, retail stabilizes the stock.

That's why people bring them in on an IPO.

We have had many of our customers who raised from retail pre-IPO go public and found that the retail can be a very stabilized force because they are bought in on the long-term mission of the brand.

That's part of why they invest.

It's a core function of why they.

Invest.

And so I think the challenge we in the capital markets have is that we need to bring retail in earlier than just the IPO round.

And that's what DealMaker's mission is and what so many founders today are realizing that retail can form a part of the cap stack from the very early days, the same way a stock option plan does.

Your users should be part of the journey with you.

They help you build an online brand.

They help drive revenue.

Let them have a share of the story.

And speaking of which, you recently helped Picasso raise $72 million directly from over 17,000 retail investors bypassing the traditional DC gatekeepers.

So tell me why you see retail heavy cap tables as a competitive advantage.

It really is because brands are built online today and so everybody knows the power of the crowd.

And when a business can harness that, they can create 80% more engagement with individuals, which is for the good of the brand.

And so there's a variety of different ways that folks can benefit the brand.

For Picasso, they become users on the system, so they actually are driving. more revenue to the business and so more founders today can think about a diversified cap table where institutions or VCs may bring strategic guidance on how to build a business, but there's a place for the users and the crowd as well who are going to help be beta testers, build the brand online with organic social posts and a variety of other benefits like that.

And very quickly Rebecca, before I let you go, institutional investors have long argued that they bring stability as well as rigor to the listing process.

So retail investors complimenting or even improving on the role that allocations like SpaceX's become more common here.

I think it's exactly as you said, and Elon Musk knows he has a great profile that he can benefit from on the cap table.

And so as a forward thinker, he's interested in doing something and I think he's going to help revolutionize the way people are thinking about the cap table.

Back in the 50s and 60s, you didn't see stock option plans in every business and today you do because people realize.

I, hey, if employees own part of the business, they're going to perform better.

And so it's the same thing.

There's always been this challenge around how to do retail communications and it being too difficult, but I'm here to say those problems have been solved by companies like DealMaker and other folks.

Social media is one to many communication, and that's just dead normal in today's day and age.

Rebecca, we will have to leave it there as we are counting down to the opening bell here at the New York Stock Exchange, but always great talking to you.

Thank you so much for joining us.

Thanks for having me.