SpaceX Shares Tumble Below IPO Price, Facing More Volatility

SpaceX shares have fallen below their initial public offering (IPO) price, signaling potential for further volatility in early August as more shares become available for trading. The company's stock reached a low of $132.15 on Wednesday before closing at $135.27, down 33% from its record close shortly after the IPO. Despite the decline, SpaceX remains one of Wall Street's most valuable companies with a market capitalization of approximately $1.8 trillion.

The company's IPO on June 11 was the largest in U.S. history, raising $75 billion. However, less than 5% of its shares were made available for public trading, creating high demand and contributing to an initial valuation of $2.1 trillion after its first day on the Nasdaq. As "lockup" restrictions on insiders begin to lift in the coming months, a significant number of additional shares could enter the market.

Jay Hatfield, CEO of Infrastructure Capital Advisors, noted that while the current stock level is relatively safe for trading, caution is advised due to the upcoming lockup expirations. Even after the selloff, SpaceX's stock is valued at 49 times expected revenue, a multiple that remains high compared to other market favorites like Tesla, which trades at a revenue multiple of 15.

Analysts and investors who remain bullish on SpaceX point to its profitable Starlink internet service, its government rocket launch business, and Elon Musk's established investor appeal as justifications for its premium valuation, despite the company reporting a net loss of nearly $5 billion last year. According to LSEG data, 27 out of 32 analysts covering the stock recommend buying, with only one recommending a sell and four holding a neutral stance.

Historical data suggests a pattern of underperformance for companies whose shares drop below their IPO price within the first two months of trading. A Reuters analysis of 50 U.S. IPOs since 2010 found that stocks experiencing such a dip had a median gain of 61% since their debuts, compared to a median gain of 112% for those that did not fall below their IPO price.

Lockups Set to Lift

A series of restrictions governing insider and early investor stock sales are scheduled to expire over the next several months. The first release, on the second trading day after the company's debut quarterly report, will allow employees and some early investors to sell approximately 911.5 million shares. The value of these shares is currently around $123 billion, exceeding the $86 billion worth of shares currently available for trading. An additional 455.8 million shares could become available if SpaceX's stock price remains above $175.50 for at least five consecutive trading days leading up to the quarterly report. By December 8, restrictions are expected to lift, increasing the number of potentially tradable shares to 40% of the company's total. The remaining 60%, including Musk's stake, will remain locked up until mid-2027.