The Australian component of the SpaceX IPO proved 3 things:
- there is strong demand from Australian retail investors for direct access to major global IPOs
- there is still room for innovation in Australian equity capital markets
- we have a regulator in ASIC that is willing to be pragmatic, particularly when it comes to transactions that help illustrate the importance of public markets.
But will the deal impact sentiment here in Australia and put a rocket under the local IPO market? That is the trillion-dollar question which we expect will be impacted, at least in part, by how SpaceX’s shares trade over the short to medium term.
How was it innovative?
The SpaceX IPO was the largest IPO in history raising US$75bn – nearly double the size of the second biggest. Most interestingly from an Australian perspective, it was structured to include a direct offer to Australian retail investors under an Australian compliant prospectus. This meant Australian retail investors could apply directly for shares in a US IPO in way they have not been able to in the past.
The key piece of innovation was in the structuring of the Australian prospectus. Rather than ‘re-cutting’ the US prospectus to look and feel like a typical Australian document – a more novel approach was adopted. The Australian prospectus was structured to comprise the US prospectus (containing the main, substantive disclosures), supplemented by an Australian ‘wrap’ containing information necessary to ensure the document as a whole complied with Australian disclosure requirements and ASIC’s regulatory settings.
The Australian offer was also structured to ensure that it fit seamlessly within the overall global offer, including having regard to issues related to marketing, distribution, settlement, timetable and underwriting matters.
How was ASIC pragmatic?
ASIC took a principles-based approach in facilitating the novel structure of the Australian prospectus and not simply saying ‘no’ when presented with something that looked different.
It also took a pragmatic approach to some of the disclosures made by SpaceX in the prospectus which, given its business, were not the typical statements you would see in Australian disclosure documents.
The transaction is a great example of what can be achieved when lawyers, other advisors and ASIC work collaboratively for the benefit of Australian retail investors.
What does this mean moving forward?
A few things:
- We have a potential roadmap that can be used to encourage other large international IPO aspirants to consider Australia as a viable and important component of any global offer. That is not to say that ASIC will allow the approach used for SpaceX’s Australian prospectus to be used on any transaction – ASIC has been clear that it will consider its use on a deal-by-deal basis but that it ‘does not want to artificially interfere with or prevent Australian retail investors from getting direct access to an investment opportunity that is already relevant to them.’[1]
- Australia is a strategically important jurisdiction for international issuers and investors as the integration of global capital markets continues.
- There is clear demand in the Australian market for IPOs and retail investors are eager to participate directly in globally significant IPOs. Whether that translates into renewed momentum for the broader IPO market in Australia will depend on a range of factors, including market conditions and investor confidence.
In our view, the real significance of the SpaceX transaction from an Australian perspective is not its size or how its shares trade, but that the transaction demonstrated something much bigger - Australian retail investors increasingly think globally, and there is both regulatory willingness and market demand to give them direct access to globally significant investment opportunities. If that proves to be the lasting legacy of the transaction, SpaceX may have done more than complete the world's largest IPO – it may have provided a blueprint for the next evolution of Australia’s public markets.
