Private Market Selloff Puts Pressure on SpaceX Valuation Ahead of Crucial Liquidity Deadline 

The company’s stock dipped as low as $132.15 Wednesday before closing at $135.27. This drop below its blockbuster IPO price of $135 a share signals potential volatility ahead for Elon Musk’s rocket and internet business, especially as the number of shares available for trading on the Nasdaq stands to increase significantly in early August. The stock has now tumbled 33 percent from its record close following the June 11 public sale that raised a record $75 billion. Even after this decline, the company maintains a market capitalization of roughly $1.8 trillion. While the IPO was the largest in U.S. history, SpaceX made less than 5 percent of its shares available, forcing investors to fight for a scarce number of shares that valued the company at $2.1 trillion on its first day. 

Lockup restrictions on insiders will lift in the coming months, potentially flooding the market with shares. Jay Hatfield, CEO of Infrastructure Capital Advisors, noted that while the current level is relatively safe for trading, they will not overweight the stock due to the upcoming lockup. The stock still trades at 49 times expected revenue, which remains pricey compared to Tesla’s revenue multiple of 15. Bullish analysts argue SpaceX deserves a premium due to its profitable Starlink service, government rocket business, and Musk’s track record, despite a net loss of nearly $5 billion last year. LSEG data shows 27 of 32 analysts recommend buying, four are neutral, and one recommends selling. 

A Reuters analysis of 50 high-profile U.S. IPOs since 2010 showed that companies whose shares fell below their IPO price in the first two months underperformed the rest, posting a median increase of 61 percent compared to 112 percent for those that kept their gains. Rank-and-file employees and early investors can sell 911.5 million shares on the second trading day after the debut quarterly report, expected in early August. These eligible shares are worth $123 billion, surpassing the $86 billion of shares currently trading on the Nasdaq. Another 455.8 million shares become eligible for sale if the stock stays above $175.50 for five out of ten consecutive trading days leading up to the report.