To The Moon

Tomorrow Marks Unprecedented Share Lockup Expiry for SpaceX, Dwarfing All Prior US Stock Market Events

The US stock market is bracing for the largest-ever post-IPO lockup expiry, with approximately 911.5 million SpaceX insider shares set to become unrestricted on Thursday, August 8. This block, valued at roughly $116 billion, is historically unmatched in scale.

This event arrives just two days after SpaceX released its first quarterly earnings report. Market anxiety over potential selling pressure has already been reflected in the stock price, which has fallen about 40% since its closing high on June 16, erasing over $425 billion in market capitalization.

The combination of lockup expiry and valuation debates has fueled a significant short-selling wave. According to S3 Partners data, approximately 30% of the currently tradable shares are shorted, generating about $7 billion in paper profits for short sellers. This short interest surpasses the dollar value of shorts on Tesla. Furthermore, the phased unlocking structure means Thursday is not the endpoint. By early December, the total number of tradable SpaceX shares will surge from roughly 639 million to 5.33 billion, a more than sevenfold increase from current levels.

Unprecedented Supply Shift

At its IPO, SpaceX deliberately maintained an exceptionally small float. The 639 million publicly traded shares represented a tiny fraction of the total equity, forcing investors to compete for a limited supply. This scarcity significantly supported the company's early valuation.

The 911.5 million shares unlocking tomorrow represent about 140% of the original float. Combining both, the potential marketable shares will rise to approximately 1.55 billion. It is crucial to note that these shares already exist; the lockup expiry does not cause dilution but rather provides employees and early investors with their first opportunity to gain liquidity after years of holding.

The central market question isn't whether all 9 billion shares will be sold, but rather who holds them and why they might choose to sell now. For many SpaceX employees, company stock represents a significant portion of their compensation and net worth. Moderate selling for diversification is a rational portfolio move. Venture capital funds, constrained by their own fund lifecycles, may also need to distribute returns or shares to limited partners, even if they remain optimistic about SpaceX's long-term prospects. Early investors have substantial paper profits, providing a strong incentive to exit.

Substantial Profits for Early Investors Fuel Selling Pressure

Despite the recent price correction, early shareholders still hold significant unrealized gains compared to their entry costs, which is the core driver of market concern about selling pressure.

In a private fundraising round a year ago, SpaceX was valued at roughly $400 billion. Earlier this year, SpaceX acquired xAI, a deal Bloomberg reported valued the combined entity at $1 trillion, with xAI itself valued at $250 billion. This transaction generated multi-fold returns for many investors.

Even at Tuesday's intraday price of around $114 to $115, the stock remains well above the cost basis of most early private investors, meaning selling at current levels is still profitable. The phased lockup schedule provides these investors with the flexibility to sell in tranches at different prices over the coming months.

Large Short Positions Pose Potential for a Squeeze

The lockup expiry has become a core thesis for short sellers. As of July 29, about 219.3 million SpaceX shares were shorted, representing 34% of the float and a dollar value of roughly $24.6 billion, exceeding the dollar value of short positions on Tesla. Notably, on June 23, the short interest was only about 40 million shares, indicating a dramatic fivefold increase in short positions over just over a month, showing the market has already priced in significant lockup risk.

However, the situation is not one-sided. Short sellers must eventually buy shares to cover their positions. If the actual selling by insiders on Thursday is less than expected and institutional buying emerges, the large short position could fuel a rapid price rally, creating a short squeeze. Over the past 12 trading days, SpaceX shares have fallen in 10 of them, driven by lockup anxiety, a Starship rocket launch abort due to engine failure, and a broader rotation of capital out of AI-themed stocks.

Thursday is Just the Beginning

SpaceX did not use the standard 180-day uniform lockup. Instead, it designed a staggered, phased release mechanism to expand the float while minimizing the impact on supply-demand dynamics.

After August 8, a conditional trigger exists: if SpaceX shares close at or above $175.50 for at least five of the ten trading days before the next earnings report, an additional 455.8 million shares will become eligible for trading immediately after that report. Based on Monday's closing price of $119.85, reaching this threshold would require a price surge of over 46%, which market participants widely view as challenging. Elon Musk holds approximately 7.8 billion shares, about 60% of the total. His lockup extends to over a year after the IPO, or at least until mid-2027, so he is not a source of near-term selling pressure.

Two Key Indicators to Watch

Analysts advise investors not to judge the lockup's impact solely by Thursday's price action. Instead, they should focus on two core metrics.

The first is trading volume. An abnormal surge in volume on Thursday and in the following days would signal that the market is absorbing real supply pressure, rather than just reacting emotionally to the lockup news. Insider sale filings will later provide more clarity on who is selling, but they won't cover all employees and early shareholders.

The second is the $135 IPO price. While this price has no special significance for fundamental valuation, it is a well-known reference point for both public investors and insiders. If the stock can consistently recover and hold above $135 after the lockup, it would indicate that market demand is effectively absorbing the expanded float. Conversely, if the stock languishes below the IPO price, it provides a stronger incentive for early shareholders with much lower cost bases to sell.

The volatility in SpaceX has already had a spillover effect on the broader IPO market. According to Bloomberg data, the weighted average return for companies that went public this year is now negative 4.4%. Even excluding SpaceX and SK Hynix, the average return for new listings this year is only 5.3%, significantly underperforming the S&P 500's 9.4% gain over the same period. Balancing the release of liquidity with the stabilization of the stock price will be a core challenge for SpaceX and its underwriting team in the months ahead.