Whalesbook
What Happened
Elon Musk’s aerospace company, SpaceX, is set for one of the most anticipated stock market debuts in history. The company aims to raise approximately $75 billion by listing on the Nasdaq exchange, with trading expected to begin on June 12. Reports suggest the IPO is targeting a valuation of around $1.75 trillion, which would position it among the top US-listed companies by market value. The offering has drawn significant attention globally, as the company operates in high-growth sectors like satellite internet, space infrastructure, and AI technology.
Why Access Is Limited for Indians
For many Indian retail investors, there is a common misconception that they can subscribe to US IPOs just as they do with Indian companies via platforms like ASBA. However, SpaceX’s primary share sale is conducted through the US book-building process, which is generally not open to foreign retail investors. This means Indian residents cannot participate in the initial offer price allocation. Investors will have to wait until the stock is officially listed on the Nasdaq before they can buy shares in the secondary market.
How Indian Investors Can Participate
Once the stock begins trading on the Nasdaq, Indian residents can explore investment options through the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). This scheme allows resident individuals to remit up to $250,000 per financial year for approved purposes, including investing in overseas stocks.
To do this, investors typically use international brokerage platforms that have tie-ups with Indian fintech apps. After transferring funds via LRS, investors can purchase the stock at prevailing market prices once it starts trading. Investors should be aware that remittances under LRS exceeding ₹10 lakh in a financial year are subject to Tax Collected at Source (TCS) at 20%. This is not an extra cost, as it can be claimed as a refund when filing your annual income tax return. Additionally, investors can look at global mutual funds or ETFs that might include SpaceX in their portfolios, though this provides indirect exposure.
The Risks to Consider
Investing in high-profile overseas IPOs involves risks that are different from domestic investing. First, there is currency risk: your returns will depend on both the stock's performance and the movement of the US Dollar against the Indian Rupee. If the Rupee strengthens, your returns in Rupee terms may be impacted.
Second, mega-cap tech IPOs are often highly volatile in the weeks following their listing as the market finds a fair price. High valuation expectations also mean there is less margin for error for the company in its upcoming quarterly results. Finally, as a foreign investor, you have less direct information and may find it harder to track local US regulatory or competitive changes compared to tracking Indian companies.
What Investors Should Track Next
Investors may monitor the stock's performance in the first few days of trading to gauge market sentiment and volatility. Another key development to watch is whether major global indices, such as the MSCI, include the stock in their baskets, which often leads to long-term buying interest from passive institutional funds. Finally, as with any investment, it is essential to review your personal financial goals and ensure that any foreign allocation fits within your broader portfolio strategy and risk appetite.