After a blockbuster initial public offering, SpaceX, also referred to as a "rocket-and-AI firm," saw its shares drop more than 6% on June 18, closing down 3.56% at $185.00, though still 30% above its $135 offering price. The stock was on track to fall for a second straight day by June 20, after declining nearly 5% on June 19, following a 49% jump in its first three trading days. This decline has reportedly narrowed profits for major institutional investors like Robinhood, Fidelity, and SoFi who acquired shares at the IPO price.
SpaceX's stock (trading as SPCX on Nasdaq) experienced a significant downturn, falling over 26% from its all-time high of $225.64 on June 16 to approximately $165 by June 22. This drop wiped out most of its initial gains, which had briefly pushed its market capitalization close to $3 trillion, surpassing Amazon. The immediate trigger for this selloff was a disclosure on June 22 of a planned $20 billion bond offering, reportedly to refinance a bridge loan taken to acquire xAI, Elon Musk's AI startup, and to fund ambitious AI expansion plans. Analysts have been urging caution due to the company's relatively small public float and high valuation, with its five-day volume-weighted average price (VWAP) standing at $181.71 on June 18, putting the average post-IPO buyer in a near break-even situation.
Elon Musk's paper wealth reportedly declined by $100 billion to $200 billion from its briefly touched $1.4 trillion high after the IPO. The company's massive valuation, approaching a multi-trillion dollar figure despite reportedly losing billions annually, has analysts questioning its justification based on current fundamentals. Some analysts, however, remain bullish, with Oppenheimer raising its price target from $190 to $250, citing SpaceX's acquisition of AI coding company Anysphere and its ownership of the entire AI stack.
The stock has displayed extreme volatility, with intraday swings as much as 11 percentage points from a 6% gain to a nearly 5% loss in a single session. This volatility is attributed to profit-taking and options-driven trading, given the lack of traditional financial anchors for a newly public company. While some anticipate continued volatility due to the challenge of achieving lofty revenue projections, the stock could see support from upcoming index inclusions, with an estimated 30% of its free float potentially owned by passive investors within two weeks of the IPO. This demand, combined with a low free float, could exert upward pressure on shares.
The decline suggests a reassessment by investors, moving away from the initial frenzy and closer to fundamental valuations. Despite the concerns, investment banks like Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, and Morgan Stanley, who provided the initial bridge financing for the xAI acquisition, are expected to run the bond offering, which would mark SpaceX's first issuance of investment-grade dollar bonds.
