BY COMFORT OGBONNA
SpaceX shares have fallen below their highly anticipated initial public offering price, raising concerns about increased volatility for Elon Musk’s space and satellite internet company as more shares become available for trading in the coming months.
The company’s stock dropped as low as $132.15 on Wednesday before recovering slightly to close at $135.27, just above its IPO price of $135 per share. The decline marks a significant reversal from the strong debut that followed SpaceX’s record-breaking public listing, with shares now down about 33% from their peak closing level shortly after the company raised $75 billion in its June 11 market debut.
Despite the sharp decline, SpaceX remains one of the most valuable companies in the world, with a market capitalization of approximately $1.8 trillion. The company’s IPO was the largest in U.S. history, but only a small portion of its shares were initially made available to public investors, creating limited supply and intense demand that pushed the company’s valuation to around $2.1 trillion after its first day of trading on the Nasdaq.
The limited availability of shares helped fuel early price gains, but investors are now preparing for a potential increase in market supply as restrictions preventing company insiders, employees, and early investors from selling their shares begin to expire.
These so-called lockup restrictions are expected to be lifted in stages over the coming months, potentially bringing hundreds of millions of additional shares into the market and increasing pressure on the stock price.
Jay Hatfield, chief executive officer of Infrastructure Capital Advisors in New York, said the recent decline may present a trading opportunity but cautioned investors about the upcoming increase in available shares.
“We think at this level, it’s relatively safe to at least be involved from a trading perspective,” Hatfield said. “We won’t overweight it because they do have the lockup coming.”
Even after the selloff, SpaceX continues to trade at a premium valuation. The company is valued at approximately 49 times expected revenue, making it one of the most expensive major stocks on Wall Street based on that measurement. By comparison, Tesla, another company closely associated with Musk, has recently traded at a revenue multiple of about 15.
Supporters of SpaceX argue that the company deserves a premium valuation because of its diverse business operations, including its profitable Starlink satellite internet service, its government and commercial rocket launch operations, and Musk’s ability to maintain strong investor confidence.
However, the company’s valuation also reflects high expectations. SpaceX reported a net loss of nearly $5 billion last year, highlighting the challenges of maintaining profitability while investing heavily in space technology, satellite networks, and future expansion projects.
Investor sentiment remains largely positive among Wall Street analysts. According to market data, out of 32 analysts covering the stock, 27 recommend buying, while only one recommends selling and four have neutral ratings.
Historical data from major U.S. IPOs suggests that companies falling below their initial offering price shortly after going public often face weaker long-term performance compared with companies that maintain their IPO levels. An analysis of 50 major U.S. IPOs since 2010 found that companies whose shares dropped below their IPO price within the first two months generally underperformed their peers, although many still delivered gains over time.
Among those companies, 21 fell below their IPO price during the first two months of trading. Those stocks recorded a median increase of 61% since their market debut, compared with a median gain of 112% for companies that avoided falling below their IPO prices during that early period.
The biggest challenge facing SpaceX investors now is the upcoming release of additional shares into the market.
The first major release will allow company employees and certain early investors to sell approximately 911.5 million shares on the second trading day after SpaceX reports its first quarterly earnings results. Analysts expect that report to arrive in early August, although the company has not announced a specific date.
Those shares are currently worth around $123 billion, exceeding the value of the approximately $86 billion worth of shares currently available for public trading on the Nasdaq.
Another 455.8 million shares could become eligible for sale 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 quarterly earnings report.
By December 8, the series of lockup expirations could increase SpaceX’s publicly available share float to roughly 40% of the company. The remaining 60% of shares, including Musk’s stake, are expected to remain restricted until mid-2027.
The upcoming increase in share availability will test whether investor demand can continue supporting SpaceX’s massive valuation. While the company’s leadership in space technology and satellite communications has generated strong enthusiasm, the market will be watching closely to see whether new supply pressures create further volatility in the months ahead.
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