Market confidence in SpaceX has shifted dramatically just one month after the company completed its record-breaking initial public offering. The stock price has fallen below its IPO level, short sellers have profited by roughly $4 billion, bond yields are approaching junk levels, and investor enthusiasm for this Elon Musk-led rocket and AI company is rapidly cooling.
This week, SpaceX shares fell below the $135 IPO price for the first time, representing a decline of approximately 40% from the mid-June intraday high of $225. On Friday, the stock dropped another 5% to close at a new all-time low of $123.99. Concurrently, the company's bond yields have risen sharply, and the credit default swap market has expanded, indicating a broad market repricing of risk across both equity and debt.
Short Sellers Pile In
Short selling pressure is building rapidly. According to data from S3 Partners, over the past month, investors betting against SpaceX have recorded paper profits of about $4 billion. Currently, around 30% of the approximately 640 million outstanding shares of SpaceX have been borrowed for short selling, a figure that has increased by 10 percentage points in just the last ten days.
Dec Mullarkey, Managing Director at SLC Management, noted that "investor enthusiasm for SpaceX appears to have cooled," with the company's stock and bonds now "pricing in more risk."
Lockup Expiration Weighs on Sentiment
A key driver of the current sell-off is the impending expiration of lockup periods for pre-IPO shareholders. Reports citing market participants suggest that around 900 million shares could become eligible for trading as soon as next month, potentially flooding the market with new supply.
The Chief Investment Officer of a small North American hedge fund, which reportedly made $20 million by shorting SpaceX in early July, stated, "Even if SpaceX announced it conquered the moon and found gold inside, there wouldn't be enough money in the market to absorb those shares when more stock hits in August." This expectation is prompting some investors to exit their positions early rather than face a potential liquidity shock.
Bond Market Weakness Mirrors Equity Slide
Pressure is also mounting in SpaceX's bond market. The company completed a $25 billion bond issuance in late June shortly after receiving investment-grade credit ratings from major agencies. However, its bond yields are now approaching levels typical of junk-rated borrowers.
The yield on one 30-year SpaceX bond has climbed to 7.4% from 6.7% at issuance, pushing its price down to around 91 cents on the dollar. Meanwhile, the credit default swap market for SpaceX, which emerged in late June, is showing increased stress. CDS spreads are now quoted at 158 basis points, meaning the annual cost to insure $10 million of debt against default for five years has risen sharply to approximately $158,000 from $110,000 at the end of June.
The decline in SpaceX shares is not an isolated event but is occurring against a backdrop of broader pressure on highly-valued technology stocks. U.S. semiconductor stocks finished the week with their worst performance since the market turbulence of last year's "Liberation Day." The collective pullback in core AI-related sectors has further intensified selling pressure on SpaceX.
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