SpaceX shares slumped to their lowest level since the rocket, satellite, and AI company went public, briefly falling below their initial public offering price, as investor fanfare quickly evaporated in the month since its trading debut.
The stock was headed for a fourth day of losses after slumping as low as $132.15, ending the day just above the $135 per share level that SpaceX sold them to investors at last month as part of a record $86 billion offering.
A company’s shares falling below the IPO price within days or weeks of its first trading day punctures the narrative that’s been carefully choreographed by the company and its bankers to hype up expectations. Putting shareholders in the red at such an early stage is a blow to confidence that some newly-listed firms don’t recover from.
SpaceX shares have been subject to volatility usually associated with new IPOs, surging nearly 50% over their first three days of trading, only to lose nearly a quarter of their value over the next three sessions.
“Investors are becoming more cognizant that much of SpaceX is about its xAI ambitions,” said Dec Mullarkey, managing director at SLC Management. “As markets get more cautious on the cost and efficacy of the intensive buildout, SpaceX plans may sound too far removed from immediate cash flow,” he added.
There could be more pain ahead too. The first of many share lockups that have kept early investors from selling shares are set to expire once the company reports its first set of quarterly results — something it must do in the coming weeks and will enable some holders to sell shares for the first time. That will kick off a stretch of weeks where millions of shares will become available.
Some of the stock’s early gains may have also been fueled by forced buying from passive index-tracking funds. Shares of the Elon Musk-led company were added to the Nasdaq 100 Index in July after Nasdaq Inc. changed its rules to allow newly listed, large-cap companies to be included in the index in as little as 15 trading days, down from the previous three-month minimum.
Of course, being included in the indexes could be putting extra downside pressure on SpaceX shares also swept up in the artificial intelligence trade. The Nasdaq 100 shed 0.3% Wednesday, led by a selloff in chip stocks as investor concerns over the health of the AI trade continue.
“There’s so much out there all at the same time, not just negative sentiment about what IBM said yesterday, but also negative sentiment about Elon as a personality and public figure, all of that kind of collides into this extra momentum to the downside in a moment in time where there’s pressure and profitability is going to be a key metric,” said Brian Mulberry, chief market strategist at Zacks Investment Management.
Despite the slump, Wall Street remains largely upbeat on the stock. The end of a quiet period for analysts at banks that participated in the IPO ushered in a spate of bullish analyst reports, including Raymond James’ Street-high $800 price target.
Meanwhile, SpaceX bears are minting billions on paper as the company’s stock price cracks ahead of a closely-watched rocket launch and upcoming earnings that will unlock a flood of shares.
Short-selling investors have seen paper profits jump to $3.88 billion, data compiled by S3 Partners show. Investors have been adding to their bets against the company as share prices have slumped with nearly 37 million shares sold short, worth about $5 billion, over the past week, the data show.
The returns for skeptics came as bearish investors added to their bets with roughly 181 million shares, or 28% of the available stock for trading, sold short, the data show. That’s one of the highest levels for a newly-public company in its first month, according to S3’s Ihor Dusaniwsky.
