SpaceX's stock price has fallen below its offering price just one month after its listing, with nearly all of its early gains being wiped out. SpaceX is facing a typical post-IPO confidence test, and the upcoming expiration of lock-up periods adds further downward pressure.
On Wednesday, SpaceX's stock price fell 2.9% at one point to $132.15, dropping below the $135 per share offering price set in last month's record $86 billion IPO. It eventually closed at $136.08, slightly above the IPO price.
The stock's movement shows the wild swings typical of new listings: it surged nearly 50% in the first three trading sessions after its debut, only to give back almost a quarter of those gains in the next three sessions.
Beyond the stock price, more noteworthy is SpaceX's newly issued $25 billion bond maturing in 2056. Since it began trading on June 24, its price has been declining steadily, and its current yield has reached 7.5%, comparable to that of junk bonds.
Dec Mullarkey, Managing Director at SLC Management, said:
"Investors are increasingly realizing that SpaceX's story is largely about its xAI ambitions. As the market becomes more cautious about the costs and benefits of large-scale infrastructure projects, SpaceX's plans sound too distant."
In SpaceX's $75 billion IPO financing in June, approximately 20% went to retail investors, an unusually high proportion for a large-cap stock offering. The stock price falling below the IPO price not only punctures the carefully crafted listing narrative by the company and its underwriters but also plunges some newly listed companies into a confidence crisis that is difficult to reverse.
Downside risks may not be fully exhausted. As SpaceX must release its first quarterly results in the coming weeks, the lock-up periods for the first batch of early investors' shares will expire accordingly. If these investors start selling after the lock-up expires, the stock will face greater selling pressure.
The sensitivity of this timing lies in the fact that the disclosure of a new stock's earnings often becomes a window for early investors to realize profits. Although the current stock price has fallen significantly from its highs, there are still considerable paper gains relative to the early investors, making the motivation to sell not negligible.
SpaceX's early stock price surge may be partly attributed to mandatory buying by passive index funds.
After Nasdaq changed its rules, large newly listed companies are allowed to join the Nasdaq-100 Index as soon as 15 trading days after listing, a significant reduction from the previous minimum requirement of three months. Based on this, SpaceX was added to the index in July and joined the Russell 1000 Index about two weeks after its IPO in late June.
According to Bloomberg, Rob Du Boff, an analyst at Bloomberg Intelligence, estimates that SpaceX's inclusion in the Nasdaq-100 and related FTSE Russell indices will prompt index funds to buy at least $5.4 billion worth of its stock. This sizable passive buying supported the stock price in the early stages of listing, but such technical demand is usually difficult to sustain.
Despite the pressure on the stock price, Wall Street overall remains optimistic about SpaceX.
As the quiet period for bank analysts involved in the IPO ends, a wave of bullish reports has been released. Among them, Raymond James gave the highest street target price of $800.
According to Bloomberg tracking, over 80% of analysts give SpaceX a rating equivalent to a "buy," with an average target price of about $238, implying an upside potential of approximately 78% from the current stock price.
