SpaceX Shares Drop Below IPO, With More Volatility To Come

July 16 (Reuters) – SpaceX’s shares have fallen below their impressive IPO price of $135 per share, signaling potential challenges for Elon Musk’s aerospace company. This drop precedes an anticipated increase in trading volatility in early August, as a significant number of shares are expected to become available on the Nasdaq.

On Wednesday, the stock reached a low of $132.15 before closing at $135.27, marking a 33% decline from its peak shortly after the IPO, which raised a record $75 billion on June 11. Despite this decline, SpaceX remains one of Wall Street’s most valuable entities, with a market cap of approximately $1.8 trillion.

SpaceX’s IPO, the largest in U.S. history, offered less than 5% of its shares for market trading, leading to high demand and valuing the company at $2.1 trillion on its first Nasdaq trading day. Upcoming months will see the lifting of “lockup” restrictions on insiders, potentially increasing the available shares significantly.

Jay Hatfield, CEO of Infrastructure Capital Advisors in New York, remarked, “We think at this level, it’s relatively safe to at least be involved from a trading perspective. We won’t overweight it because they do have the lockup coming.”

Even after the selloff, SpaceX’s stock is valued at 49 times expected revenue, making it one of Wall Street’s most expensive stocks by that metric. In contrast, Tesla, another company favored by Musk investors, recently traded at a revenue multiple of 15.

Proponents argue that SpaceX deserves a high premium due to its profitable Starlink internet service, its governmental rocket launch operations, and Musk’s ability to maintain investor trust, despite the company reporting a net loss of nearly $5 billion last year.

According to LSEG data, out of 32 analysts covering the stock, 27 have a buy recommendation, one advises selling, and four are neutral.

A Reuters examination of 50 prominent U.S. IPOs since 2010 found that companies whose shares dipped below their IPO price within the first two months tended to underperform compared to those that didn’t, although most still yielded positive returns.

Among these companies, 21 experienced a decline below their IPO price within the first two months. These stocks have seen a median increase of 61% since their debut, as opposed to a 112% median gain for the other 29.

Over the next several months, restrictions on additional stock sales by insiders, employees, and early investors will gradually be lifted.

Initially, 911.5 million shares held by rank-and-file employees and some early investors will become available for sale on the second trading day after SpaceX releases its debut quarterly report.

The company has not yet announced the date for its first earnings report, which analysts anticipate will be in early August.

The shares eligible for sale are currently valued at about $123 billion, surpassing the $86 billion worth of shares now available on the Nasdaq.

An additional 455.8 million shares will become available if SpaceX’s stock price remains above $175.50 for at least five of the 10 consecutive trading days leading up to the company’s upcoming quarterly report.

Overall, by December 8, the lifting of restrictions will increase SpaceX’s pool of potentially tradable shares to 40% of the company, with the remaining 60%, including Musk’s stake, locked up until mid-2027.

(Reporting by Noel Randewich, editing by Colin Barr and David Gaffen)