SpaceX Faces Key Test as 912 Million Shares Unlock for Trading

SpaceX investors are bracing for a critical test this Thursday as a post-IPO lockup period expires, making as many as 912 million shares held by employees and other early stakeholders eligible for sale. The event could unleash significant selling pressure on the company's stock, which has already slumped 49% from its high following its public listing in June.

A Flood of Shares Looms

Lockup agreements are standard practice after an initial public offering (IPO), temporarily preventing insiders from selling their shares to promote market stability. For SpaceX, this first expiry is substantial, potentially more than doubling the current number of shares available for public trading, known as the public float. According to a Reuters report, a price-based early-release provision could even triple the float.

Analysts anticipate considerable selling from insiders who acquired their stakes at a fraction of the $135 per share IPO price. Matt Kennedy, a senior strategist at Renaissance Capital, told Reuters that these stakeholders are "sitting on such massive gains that they’ll have a very strong incentive to realize a return and diversify their holdings."

Market Braces for Volatility

The market appears to already be pricing in the potential share glut. Following a strong second-quarter earnings report on Tuesday, where SpaceX announced a 92% jump in revenue, its shares fell 7.5% in after-hours trading. Brian Mulberry, chief market strategist for Zacks Investment Management, attributed the selloff to market sentiment, telling Reuters that "media reports are that many insiders will look to sell on the strong results this week."

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Robert Hackel, CEO of institutional brokerage R.F. Lafferty & Co., noted that some pre-IPO investors are eager to sell their SpaceX holdings to fund investments in other private tech firms like Anthropic and OpenAI. "You are going to see a lot of exits," he told Reuters.

All Eyes on Early Backers

Market participants will be closely watching not just the volume of sales, but also who is selling. A significant sale by a major early backer could be interpreted as a lack of confidence in SpaceX's long-term prospects, said Lukas Muehlbauer, a research associate at IPOX.

This lockup is the first of several staggered releases planned by the underwriting banks, which will free up an additional 12.9 billion shares for trading by the middle of next year. While some analysts, like Gabriel Shahin of Falcon Wealth Planning, believe many insiders are "long-term believers" who will hold their positions, he acknowledged to Reuters that each expiry date is likely to increase trading turbulence for the stock.