Shares of SpaceX have recorded their first decline since their historic market debut, bringing a three-day rally that propelled its market value past Amazon to become the world's fifth-largest stock to a halt.
The rocket and artificial intelligence company led by Elon Musk fell as much as 4.7% on Wednesday, erasing an earlier gain that had reached 6%. This drop threatens to end the three-day winning streak, reducing the stock's cumulative gain from its $135 IPO price to roughly 50%, and potentially lowering its market capitalization below that of Amazon.
"In short, I view this as market noise for now. A significant drop would be a different story," said Michael Monaghan, partner and portfolio manager at Dallas-based Founder Funds, which holds SpaceX stock. "If the price does fall further, we might consider adding to our position," he added.
Some of the sharp intraday volatility in SpaceX's share price can be attributed to, and may also be exacerbated by, a limited public float. The proportion of SpaceX shares available for trading is relatively small, with only about 4.2% of total shares outstanding available on its first trading day. As lock-up periods restricting insider sales expire in the coming months, this could create downward pressure on the stock price.
SpaceX could also be added to major indices in the coming weeks. Nasdaq has amended its rules to allow large companies like SpaceX to be added to indices more quickly, which would compel funds tracking indices like the Nasdaq 100 to purchase the stock. Conversely, S&P Dow Jones Indices has decided against rule changes to expedite the inclusion of newly public companies, meaning SpaceX will not be immediately added to the S&P 500 index.
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