The aftermath of SpaceX's public offering saw the shows soar, in part because of demand outstripping supply. But that could soon end as a staggered release of lockups makes more shares available. By Al Root
Elon Musk fans may think that SpaceX is poised to change the world, but a big reason its stock rocketed to a peak north of $225, up 67%, from its initial-public-offering price, is good old-fashioned supply and demand.
As employees and early investors are permitted to sell shares in the coming months, SpaceX shares should come back to Earth, as they have with some other hot IPOs.
SpaceX stock has been on fire since its first trading day on June 12 as investors look for CEO Musk to repeat -- or even exceed -- his success running electric-vehicle maker Tesla. SpaceX shares rose for three consecutive days, closing at $201.80 on Tuesday, but have slipped back to $185 since then. There are just 639 million shares available for trading, a fraction of the more than 13 billion shares that SpaceX has outstanding.
Much of that 639 million has been snapped up by long-term shareholders, including money managers Ron Baron of Baron Capital and Cathie Wood of ARK Invest, and retail shareholders who have consistently bet on Musk, no matter how things appear to be going at his companies. For now, SpaceX is a $2.5 trillion company that, amazingly, just doesn't have enough shares to go around.
"SpaceX is the new meme stock," says Future Fund Active exchange-traded fund co-founder Gary Black. "This will end badly for investors paying $200 per share or more."
That the sixth-most-valuable company on the planet can be a meme stock is debatable. But Black is right to point out that trading considerations are more important than fundamentals right now.
The tight supply of SpaceX shares was exacerbated by the debut of SpaceX stock options on Tuesday. Those options were among the most actively traded, despite the relatively small number of shares available to trade. Call options, which give the holder the right to buy stock at a fixed price in the future, were more popular than puts.
Heavy call buying creates upward pressure on stock prices. A SpaceX call seller has risk if the stock rises. To hedge that risk, the call seller can buy some SpaceX stock, which can create a feedback loop where rising prices necessitate more buying to hedge options positions.
The flow of funds into ETFs like the Direxion SpaceX Bull 2x -- designed to give investors twice the return of SpaceX stock in daily trading -- also forces more shares to be bought. What's more, SpaceX will enter the Nasdaq-100 on July 6, which will force even more buying by index funds. Initial buying might amount to $7 billion to $10 billion.
That's a good chunk of the $86 billion that SpaceX raised in its IPO. The supply issue is ultimately temporary. Many traditional IPOs include a provision preventing insiders and early investors from selling stock for 180 days. SpaceX isn't doing that. Instead, it is staggering its lockup.
After the first quarterly earnings report, probably in late July or early August , 20% of the stock will come off lockup; it could be 30% if SpaceX stock is consistently above $175. Then, 7% of the stock comes off lockup on Aug. 20, on Sept. 9, on Oct. 9, and on Oct. 24. And another 28% comes off after the second-quarter report. The final amount is unlocked on Dec. 8, after 180 days.
Lockup endings can have significant impacts. Shares of EV start-up Rivian fell 21% in early May 2022, 180 days after its November 2021 IPO. Reddit used a performance-based lockup, similar to SpaceX, which shortened the period for insiders. Still, its shares dropped roughly $10, from $62 to $52, as investors prepared for the expiration in August 2024.
For SpaceX, staggering the lockup makes sense. Still, more supply is more supply. Trading research firm AgentSmyth noted recently that SpaceX September put options have been particularly active. That's a sign that traders are looking for a stock price decline after more shares are available to trade following SpaceX's first quarterly earnings report.
Trading factors don't last forever. The key for long-term investors is not to get caught up in that dynamic. No stock goes up in a straight line. And in the long run, earnings and earnings growth expectations will determine where SpaceX stock settles out.
For now, expectations are high, with Musk recently floating a $1 trillion revenue target by 2031. That might seem like pie in the sky, but it illustrates what SpaceX is trying to do: build space-based communications and artificial-intelligence businesses that can disrupt traditional telecom and tech players that generate hundreds of billions in annual sales on the ground.
Exactly how SpaceX shares will trade after more shares are available is impossible to say. Google, now Alphabet, never really struggled post-IPO. It rose almost 180% in the 12 months after an 18% day-of-IPO pop. Things didn't go so smoothly for Facebook, now Meta Platforms. Shares posted a tiny day-of-IPO gain and were down about 30% a year later. Of course, shares of both companies have soared over the years as their profits have climbed.
Neither company was as large as SpaceX on their debuts. No matter. Even Musk is still subject to the laws of gravity.
Write to Al Root at allen.root@dowjones.com
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(END) Dow Jones Newswires
June 19, 2026 21:32 ET (01:32 GMT)
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