SpaceX (SPCX), warns of 'stock plunge' after recovery due to impending supply bomb

▲ SpaceX (SpaceX, SPCX)/AI Generated Image

A massive volume of shares from the lock-up period for SpaceX (SpaceX, SPCX) has begun to be released. Up to 911.5 million shares becoming available for trading has emerged as a key variable that could increase short-term stock price volatility.

According to Barron's on August 6 (local time), up to 911.5 million SpaceX shares were released from lock-up on Thursday. This volume is more than 140% of the shares that were tradable since the initial public offering (IPO). Analysts suggest that the potential for additional selling pressure could weigh on the stock price as shares held by insiders and early investors become available in the market.

SpaceX's stock price showed intense volatility immediately after its earnings announcement. The company recorded first-quarter revenue of $7.8 billion after its listing, surpassing Wall Street's forecast of $6.8 billion. The earnings before interest, taxes, depreciation, and amortization (EBITDA) of its artificial intelligence (AI) division also reached $1.1 billion. While the market expected a slight loss, actual performance showed a profit. Despite this, the stock fell 12% on Wednesday. This followed a roughly 16% surge over Monday and Tuesday, with profit-taking and lock-up release pressure combining.

Concerns about selling pressure are not short-lived. An additional 319 million shares could be released from lock-up on August 12. Then, 20 days later, another 319 million shares will become tradable. By the end of the year, over 4 billion shares could be released into the market. Shares held by CEO Elon Musk and his stock options, totaling 6.4 billion shares, will become tradable starting June 2027.

Despite the burden of a large volume of shares, the stock price showed a strong rebound on Thursday. It fell to $105.11 early in the session before rising to $114.92, marking a 6.1% increase from the previous day. On the same day, the S&P 500 fell 0.2%. Barron's analyzed that short sellers closing their positions absorbed the impact of the new selling volume. Before Thursday's trading, SpaceX's stock price was 20% lower than its IPO price of $135, and more than 50% down from its all-time high of $225.64 recorded on June 16.

Musk suggested that SpaceX's annual revenue could reach $1 trillion by 2029. This is more than three times higher than Wall Street's forecast of $284 billion. Regardless of expectations for earnings growth, the lock-up release volume, which will continue for several months, remains a key variable determining the short-term volatility of SpaceX's stock price.

[Article Summary]

-SpaceX faced a large volume of new tradable shares as up to 911.5 million shares were released from lock-up.

-An additional 319 million shares will be released on August 12 and again 20 days later, with the total tradable volume exceeding 4 billion shares by year-end.

-SpaceX's first-quarter revenue of $7.8 billion surpassed market expectations, but the pressure from lock-up releases has emerged as a key variable for short-term stock price volatility.

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