After a blockbuster IPO, SpaceX's market rally collapsed, with its shares falling 16.4% to $154.60 and wiping out $400 billion in market value. This decline placed the company 31.5% below its IPO peak of $225.64 reached on June 11. This sharp reversal was largely attributed to rising US Treasury bond yields, which pushed the two-year yield to a one-year high of 4.23%, unsettling valuations for high-growth tech companies like SpaceX that trade at over 100 times last year's revenue. The Federal Reserve's signals hinting at potential interest rate hikes further contributed to the shift in market sentiment.
The downturn was exacerbated by SpaceX's announcement of a planned $20 billion bond sale. This move is intended to repay a bridge loan linked to its AI unit, xAI, and social media platform X. Despite a projected $26.5 trillion AI market fueling its lofty valuation, SpaceX reported a $6.4 billion loss last year. The need for significant debt financing so soon after an IPO, particularly for a company already expected to be cash-flow negative until 2030, has spooked equity investors.
The bond issuance added fixed-interest obligations to a company already posting losses, prompting concerns about its long-term fiscal sustainability. S&P, which grades SpaceX at BBB, anticipates borrowings could climb to $132 billion by 2028. Analysts have noted that the market is struggling to reconcile the company's capital-intensive operations with its ambitious growth plans and high valuation. This has led to a significant reassessment of SpaceX's growth prospects and the fragility of its revenue model among investors.
