SpaceX's stock has plummeted by roughly 45% from its peak, breaking below its initial public offering price of $135 per share and recently trading near $111. This decline has occurred despite restrictions on selling for most shareholders, including those who bought into the IPO, with Elon Musk's stake, in particular, remaining locked up until mid-2027. The company's market capitalization, which briefly reached $2.1 trillion after its IPO, now stands around $1.51 trillion, with some analysts, like Morningstar's Nicolas Owens, valuing it significantly lower at $780 billion based on projected cash flows.
The upcoming lock-up expirations are expected to exacerbate the downward pressure on SpaceX's stock. The first significant tranche of 911.5 million shares, representing just under 7% of outstanding shares, became eligible for sale on August 6, following the second-quarter earnings report. This is followed by additional releases, including 328.4 million shares 70 days after the IPO (around August 20), and a massive 1.3 billion shares (28% of the 180-day lock-up shares) after third-quarter earnings in November. By December 8, restrictions will have lifted on 40% of the company's potentially tradeable shares, and in total, over $500 billion of stock could become eligible for sale by the end of the year.
Analysts are concerned about the sheer volume of shares entering the market. Unlike a typical IPO where about 20% of shares are sold, SpaceX's IPO offered only 5% of its shares, leaving approximately 12.5 billion shares locked up. Matthew Kennedy, a senior strategist at Renaissance Capital, highlighted that SpaceX has an unusually long series of lock-up releases. Nicolas Owens of Morningstar believes that most of the available shares will likely be sold due to existing sellers having low cost bases and long holding periods. While the increased float will lead to SpaceX having a greater weight in index funds, potentially absorbing some supply, Owens predicts that the supply from these lock-ups will likely outweigh demand unless fundamental sentiment or the company's story significantly changes.
Adding to the financial pressure, Morgan Stanley projects SpaceX will need to raise $670 billion in debt over the next eight years, not becoming cashflow positive until 2035. Goldman Sachs has a slightly less pessimistic outlook, expecting $270 billion in debt before the company achieves cashflow positivity in 2031. The selloff below the IPO price, initially $135 a share, is seen as an ominous sign as the company faces these significant financial hurdles and a flood of new shares hitting the market.
