Elon Musk is preparing to give retail investors an unusually large slice of the most valuable private company on Earth — and Morgan Stanley’s E*Trade appears first in line to serve it.

ETrade is in talks to take the lead in selling SpaceX shares to small U.S. investors in the rocket maker’s highly anticipated IPO later this year, according to two people familiar with the matter. Morgan Stanley, a lead underwriter on the deal, is expected to route a significant portion of shares set aside for smaller-ticket retail investors through ETrade, potentially crowding out rivals Robinhood and SoFi entirely.

Both platforms pitched for roles on the deal but are not tied to any of the underwriting banks. SpaceX is considering excluding them altogether — an unusual move for brokerages that have become fixtures in marquee listings, including Arm Holdings’ $55 billion IPO and Instacart’s $9.9 billion debut in 2023.

An Oversized Retail Bet

The SpaceX IPO is shaping up to be the largest in history — bigger than Saudi Aramco’s $29 billion record from 2019 — with a valuation that could reach $1.75 trillion, according to sources.

What makes this offering structurally distinctive is the allocation. Musk has discussed setting aside up to 30% of shares for individual investors, a person familiar with the matter said. Typical IPOs reserve 5% to 10% for retail. A significant portion of SpaceX’s retail allocation will go to private wealth and high-net-worth clients of the underwriting banks, with the remainder — the smaller-ticket, self-directed slice — being the prize E*Trade, Robinhood, and SoFi are fighting over.

SpaceX is betting that individual investors who have tracked the company for years through opaque private markets will be less likely to sell immediately after listing, avoiding the “pop-and-dump” dynamic that can destabilize new stocks. Rowan Taylor, managing partner of Liberty Hall Capital Partners — which is not involved in the IPO — compared the anticipation to Google’s public debut. “This is one of those lifetime moments in which people may say they just have to get in,” he said.

Musk’s Lane Structure

SpaceX has assigned underwriting banks to narrowly defined roles rather than letting them compete broadly. SpaceX Chief Financial Officer Bret Johnsen relayed the plan to Wall Street, sources said.

The structure reads like a diplomatic seating chart. Morgan Stanley handles smaller-ticket retail through E*Trade. Bank of America, personally selected by Musk, focuses on high-net-worth individuals and family offices in the U.S. UBS takes those investors internationally. Citi coordinates international institutional and retail distribution, with Mizuho covering Japan, Barclays handling the UK, Deutsche Bank in Germany, and Royal Bank of Canada covering Canada.

The assignments are based partly on personal relationships and past ties rather than competitive bidding, according to sources — a highly unusual approach for an offering of this magnitude.

Morgan Stanley’s Consumer Play

A leading role on the SpaceX offering would mark a significant win for ETrade, which has been battling Robinhood, Charles Schwab, and Interactive Brokers for market share in an era of heightened retail trading. It would also validate Morgan Stanley’s $13 billion acquisition of ETrade in 2020 — one of the bank’s largest ever — as part of a decade-long push to reduce reliance on wealth management and investment banking.

Morgan Stanley has previously used in-house platforms to capture larger shares of retail allocations on deals it underwrites, one source said. Fidelity is also vying for a distribution role.

Robinhood’s Bad Monday

News of ETrade’s inside track sent Robinhood shares lower on Monday. The trading platform, which competes directly with ETrade for retail investors, now faces the possibility of being shut out of the most anticipated offering in years.

Robinhood and SoFi remain in discussions to handle some sales, two people said, but without ties to any underwriting bank, their leverage is thin.

Terms Not Final

All sources cautioned that the plans could change as SpaceX nears its IPO in the coming months. SpaceX has not yet finalized the size or timing of the offering. Morgan Stanley, E*Trade, Robinhood, SoFi, Fidelity, and SpaceX all declined to comment or did not respond to requests for comment.

The direction, though, is unmistakable. The IPO that could reshape markets is being built to reach Main Street — on Wall Street’s terms.

Sources