SpaceX's shares slipped below their initial public offering (IPO) price on Wednesday, closing just above the $135 IPO price at $135.27 after an intraday low of $132.15. This marks a significant turn for the company, whose stock had surged nearly 50% in its first three days of trading before losing almost a quarter of its value over the subsequent three sessions. The decline has evaporated investor enthusiasm barely a month after its record-breaking $86 billion offering in June.
The stock's volatility is viewed as a major test for the market, especially for other high-profile tech IPOs with significant AI ambitions like OpenAI and Anthropic. Analysts noted that new IPOs often experience post-listing volatility, but falling below the IPO price so soon can damage investor confidence, especially for retail investors who held about 20% of the allocation. The inclusion of SpaceX in the Nasdaq 100 Index in July and Russell 1000 Index in late June, driven by rule changes to allow faster inclusion for large-cap companies, initially led to forced buying by index funds, estimated at $5.4 billion by Bloomberg Intelligence analyst Rob Du Boff.
Despite the recent slump, Wall Street analysts remain largely optimistic. Over 80% of analysts tracked by Bloomberg issued a buy-equivalent rating, with an average price target of approximately $238, suggesting a 76% upside from current levels. Some analysts, however, express caution, noting that much of SpaceX's valuation relies on its xAI ambitions, and concerns about the cost and efficacy of an intensive buildout for AI could be weighing on the stock. Moreover, the upcoming expiration of lock-up periods for early investors upon the company's first quarterly results could introduce further selling pressure.
The drop below the IPO price also coincides with broader market concerns regarding the artificial intelligence trade, as evidenced by a 0.3% decline in the Nasdaq 100 on Wednesday, led by a selloff in chip stocks. Experts highlighted that investor focus on IPO prices often creates an illusion of stability, while post-IPO volatility and price discovery are normal market mechanics. Some analysts believe that the current struggles could put a damper on the IPO market's AI euphoria, while others suggest that companies with large capital needs, like OpenAI, might accelerate their public offerings to beat competitors to market.
