The investor’s guide to the SpaceX IPO
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Welcome to Shared Lunch, brought to you by Sharesies. I'm Garth Bray. Today, inspired by the journey that Elon Musk is taking us all on to the stars and wherever, we're taking a look at IPOs and what they mean, how a company decides to launch, who makes that happen, and what it means for investors. We'll have some of the best in-house experts at Sharesies helping us with that. And of course, we'll talk about the SpaceX IPO as well. Before we get to that, some important information you should always consider before investing. Investing involves risk. You might lose the money you start with. We recommend talking to a licensed financial advisor. We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and hear is current at the time of recording. Okay, this is a fantastic trans-Tasman crossover here between our offices in Wellington, where we have Susanna Batley joining us, and Jackie Newman also in Sydney at the Sharesies office. I'm going to start with you, Jackie. What is an IPO?
An IPO? An IPO is really the first time that a company offers its shares to the public. So what is happening is that ownership is transitioning. So prior to IPO, the company might be owned by founders, by employees, by VC, by private equity. The process of an IPO takes that company from that private ownership into the public hands, if you like. There are a number of ways that this can be done. Firstly, you can use primary shares. So the company can issue new shares to raise capital and the proceeds of the raise go to the company. The company might use that to fund growth. It might use it for acquisitions. Another component of an IPO might be what's called a secondary sell down. So this is where you've got the owners, the private owners selling down all or part of their holding.
And that can be, you know, in its entirety or just part of their holding. So often IPOs are a combination of both. So you've got this primary and secondary or sell down component there. But sometimes it's one or the other. And it's an important thing to be aware of when you're considering any IPO.
Because I guess if you're a potential investor, it's good to look at who else is going to be in the company with you and also maybe who's leaving and why. Is that fair comment?
Often we think about those existing owners before the IPO as insiders. And really, they have much more information about the company themselves. then maybe new investors that are looking at it once it's listed. And so if those existing shareholders are selling down, maybe there's very good reason for that. But it is definitely worth thinking about, given that they probably know more information about it. So why are they selling versus, say, raising new money for growth and going, actually, we've got so many good opportunities. We want to raise more money. We're happy to dilute ourselves in order to grow the pie and grow the value of the company.
So obviously this is a pretty big step going public and I would imagine the rules are very different whether you're doing it here in New Zealand, there in Australia or on one of the big US markets. Are there general themes that kind of tie them all together that either of you have picked up on?
Yeah, I mean, look, each exchange has their own listing rules. So there are differences from exchange to exchange. But by and large, you know, the exchanges are designed for all investors to have good current information in order to invest. And so there are a lot of commonality or themes across the rules particularly as it relates to disclosure and making sure that companies are disclosing relevant information in a very timely way and other rules that make it safe for all investors whether that's retail or institutional investors to be looking at the investment option and having good information to make decisions.
I think What the offer document is really trying to do is provide as much detail as possible around what does this company actually do? How do they make money?
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