SpaceX falls 20% below IPO price, erasing US$1.2 trillion value

SpaceX’s lofty valuation and preparations for a wave of potential selling pressure has drawn a swarm of short-selling investors over the past month. Photo by Patrick T. FALLON/AFP via Getty Images

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The stock slumped five per cent to US$107.80 at 9:36 a.m. in New York, extending a sharp downturn from a peak hit days after its debut last month. The company has now shed more than US$1.2 trillion in market value from the June 16 peak in one of the largest market capitalization wipeouts in history.

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A volatile geopolitical backdrop paired with concerns surrounding the spending powering inflated demand and valuations across the AI ecosystem has hammered many of the industry’s largest companies in recent weeks. SpaceX investors are also weighing the potential impact of releases from the unusual staggered lock-up arrangement over the coming months with as many as 911.5 million shares available for trading on August 6.

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SpaceX’s lofty valuation and preparations for a wave of potential selling pressure has drawn a swarm of short-selling investors over the past month. Roughly 30 per cent of the shares currently available for trading are being sold short, data compiled by S3 Partners show. That skepticism has paid off to the tune of nearly US$8 billion in paper profits, the data show, as the stock sits 47 per cent below a June 16 closing high.

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The selloff is accelerating despite SpaceX executing a largely successful test of its Starship rocket on Friday, deploying upgraded satellites for its Starlink communications network and returning to Earth largely unscathed. Starship is central to Musk’s ambitions to expand SpaceX’s Starlink network, send humans to the moon and beyond and put data centres in space. But it has faced an unstable development path marred by explosive setbacks, malfunctions and delays.

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The preparation for SpaceX shares hitting the market has drawn investors and analysts to debate how far the stock could fall. Bearish investors have circled the US$100 per share level, with Morgan Stanley analyst Adam Jonas writing in a note on Friday that such a slump would mean zero or even negative value for SpaceX’s AI segment.

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The initial unlock of shares in the coming weeks will be accelerated before many get a chance to exit through early December. By the end of the year the number of shares available to trade will soar to 5.33 billion, up from around 639 million shares now, according to the initial public offering prospectus for Space Exploration Technologies Corp., as it is formally known.

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