The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Stephen Gandel

NEW YORK, May 20 (Reuters Breakingviews) - The fight over the year’s biggest bragging rights has a winner. Elon Musk’s SpaceX has selected Goldman Sachs GS.N for the coveted lead-left spot on its gigantic initial public offering, Reuters reported. It’s a surprising hiccup for Morgan Stanley MS.N, which has taken its lumps backing the erratic tech billionaire’s whims. The firm will still play a large role, and this IPO bears unusual risks. But boss Ted Pick’s quest to narrow a dealmaking gap to his arch-rival has missed a handy boost.

After all, there will be a lot to brag about if the SpaceX launch succeeds. Targeting a $75 billion raise at a $1.75 trillion valuation, the biggest debut of all time is set to also be the biggest fee generator. Since 2021, listings of over $1 billion generated average bank fees equal to 4.4% funds raised, according to University of Florida academic Jay Ritter. Even at half of that, SpaceX would end up paying $1.7 billion.

The lead-left spot, so named for where a bank’s name is printed in a prospectus, typically wins the largest share of the fee pool. Morgan Stanley’s long-standing relationship with Musk may yet spare it too big a disparity. It would be reasonable recompense for the lengths Pick’s bankers have gone to for the Tesla founder, including arranging debt for the $44 billion buyout of social network Twitter. When markets soured, the bank was stuck with the IOUs on its balance sheet.

Morgan Stanley advised on a madcap run at taking Tesla private, and provided a key lieutenant for chatbot lab xAI. Pick’s firm is also a powerhouse in tech. Though it broadly trails the more singularly investment-banking-focused Goldman Sachs, the bitter rivals trade places as the number one and two technology IPO underwriters worldwide in most years, according to Dealogic data.

And Pick has been gaining ground elsewhere. Morgan Stanley’s total revenue from advisory work and debt and equity underwriting was about 23% lower than Goldman’s last year, compared to 25% the year before and 35% in 2023.

SpaceX somewhat tarnishes the happy streak. True, the assignment carries risk: Musk is demanding unorthodox and expansive governance control, while the target valuation is dizzying. If anything goes wrong or investors revolt, blame may fall on Goldman first.

Yet it unhelpfully sets the tone ahead of more potentially historic listings, like OpenAI’s. Morgan Stanley’s long focus on stable asset management over volatile investment banking yielded higher profits, but fewer bragging rights. That’s a reasonable trade-off for shareholders, most of the time. The risk is that means missing out on outsized spoils during a record-setting boom.

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CONTEXT NEWS

SpaceX has selected Goldman Sachs as the top underwriter for its initial public offering, Reuters reported on May 19. The rocket-maker is looking to raise $75 billion at a valuation of $1.75 trillion, which would make it the biggest stock-market listing of all time, Reuters previously reported.