Wall Street on edge: SpaceX stock faces a major market test

SpaceX stock is facing its biggest test since its IPO. This coming Thursday, the lock-up period for the company's employees and early investors will expire, and up to 911.5 million shares will become available for sale. This move will not affect the total number of shares, as they already exist, but it will flood the market with a huge volume of shares that have been locked for trading for many years, serving as a critical test for the company's valuation.

The numbers behind the lock-up expiration

In the initial public offering of SpaceX, only about 639 million shares were released to the public, so the shares being released now represent about 140% of that number. For employees, whose personal wealth is largely held in company stock, this is the first opportunity to diversify their investment portfolios. Venture capital funds that invested in the company at early stages may also take this opportunity to return capital to their investors, which will increase the supply of shares on the market.

SpaceX stock was issued at a price of $135 and reached a peak of $201.80. However, it recently dropped to $114.53 — a decline of about 43% from the peak and about 15% below the IPO price. This decline does not indicate a deterioration in the company's business operations, but rather reflects shifting market conditions and investor assessments ahead of the increased supply of tradable shares.

Short sellers are waiting in the wings

This opportunity has attracted a massive number of short sellers to the market, who have built a short position worth $24.6 billion, covering about 219.3 million shares. This figure is higher than the value of the short interest in Tesla stock. This short position has jumped fivefold in just over a month, showing that the market has already priced in some of the risk associated with the current lock-up expiration.

The lock-up expiration on Thursday is only the first stage in a staggered structure that will last for months. By December, about 40% of the company's shares will be free for trading, while the remaining shares, including Elon Musk's stake, will stay locked until mid-2027. The real test for the stock in the coming days will be the trading volume and its ability to climb back above the $135 IPO price.