To The Moon

Calling this a pivotal week for Space Exploration Technologies, commonly known as SpaceX, would be an understatement. The company disclosed its first quarterly earnings after Tuesday's market close, and an even more significant event is scheduled for Thursday.

SpaceX's inaugural lockup expiration is set for August 6, 2026, when up to approximately 911.5 million shares held by company insiders will become eligible for trading. Here is what this development could mean for investors in the world's second-largest communications services stock by market capitalization.

An unconventional lockup structure

It is crucial first to grasp what a lockup expiration entails. Founders, employees, and early investors in a company are legally prohibited from selling their stock immediately after an initial public offering (IPO). They are restricted from doing so during a lockup period. The conclusion of this period is known as the lockup expiration.

Why do lockup periods exist? They prevent insiders from rushing to sell their shares after an IPO, which could cause the stock to crash just as investors who did not participate in the IPO become eligible to buy.

Lockup periods typically last between 90 and 180 days. However, SpaceX adopted an unconventional approach. Instead of a fixed lockup period after which all insider shares could be sold, the company designed a staggered schedule that spreads sales over multiple dates.

On August 6, 2026, insiders may sell up to the first 20% of eligible shares. SpaceX's lockup schedule also allowed for an additional 10% of shares to be sold early if its stock traded at least 30% higher than the IPO price during five of ten consecutive trading days before its first earnings release. However, that condition was not met.

Why SpaceX's lockup expiration could affect its stock price

Stock prices, like the prices of any product or service, are governed by the law of supply and demand. When supply increases while demand remains constant or declines, prices fall—and vice versa.

With SpaceX's first lockup expiration, the supply of its stock will increase dramatically. Up to roughly 911.5 million shares could potentially be sold by insiders starting August 6. To put that number into perspective, SpaceX's entire stock float—the total number of shares available to the public for trading—currently stands below 280.1 million shares.

You might wonder why insiders would sell their shares, given that SpaceX is trading below its IPO price of $135. The answer is that most pre-IPO investors and employees received their shares at a much lower price than the IPO price.

Some of SpaceX's employees could be especially tempted to sell their shares. The company even warned in its prospectus that its employees are "in great demand." It is not uncommon to see early employees wait until they can sell shares, then leave for another job with a rival. SpaceX has several competitors that could be willing to pay handsomely. Some employees could literally "take the money and run."

A steep sell-off is not guaranteed

Is a steep sell-off of SpaceX stock a foregone conclusion after Thursday? Not necessarily. Insiders could wait to sell shares on one of the other lockup expiration dates. They could also opt to hold onto most of their shares in anticipation of greater gains over the long term.

That said, the unique dynamics of SpaceX's situation seem to indicate that investors should expect the space stock to fall quite a bit—even if the decline is only a temporary one. When as much as or more than three times the stock float potentially comes on the market at the same time, the law of supply and demand works against shareholders. And this week is only the beginning.