Key Points
The long-awaited IPO of Space Exploration Technologies (NASDAQ: SPCX), or SpaceX for short, finally arrived on June 12. Shares shot up like a rocket on their first day of trading, soaring to $150 and then to $225 in short order. But the stock has reversed course just as quickly, falling back to around $150, a round trip that took place in under two weeks.
A lot is happening with SpaceX right now, from rampant hype around space and artificial intelligence (AI) to the company’s recent $60 billion acquisition of Cursor. But there is real, underlying math that helps explain why SpaceX stock is so volatile right out the gate, and what it might mean for the stock price moving forward.
Looking at SpaceX’s quick surge and sudden decline
SpaceX was the largest IPO in history, and arguably one of the most hyped. There were tons of investors who wanted to buy shares. By design, SpaceX only made a small portion of its total stock publicly available on IPO day, just 4.24%. These publicly tradable shares are called the float.
The small float and overwhelming demand for SpaceX shares created a classic supply-and-demand situation, in which the stock price rocketed higher in the days immediately following its market debut. But demand eventually peaks, and investors saw SpaceX reverse course after reaching about $225 per share.
So, why did the stock cool off? There are probably a few reasons. First, SpaceX’s stock was very expensive at its high. Second, the company is funding its $60 billion acquisition of Cursor with stock, diluting existing investors. The market often sells off stocks in these scenarios to reflect the anticipated dilution. Lastly, IPO day is often when excitement peaks. Investors then have a few days to step back and assess, and that hype and excitement usually fade a bit.
Where is the rest of SpaceX’s stock?
Newly public companies have lockup periods that prevent insiders and employees from dumping their stock into the buying frenzy on IPO day. While typical lockup periods are around 180 days, SpaceX is using a staggered lockup period that gradually allows insiders to sell and expand the float at a controlled pace.
The earliest selling window opens after SpaceX’s first earnings report, assuming the stock meets certain share price thresholds. There are several windows after that, building up to the traditional lockup expiration after 180 days. Additionally, CEO Elon Musk and other significant investors are subject to a 366-day lockup, allowing them to begin selling shares on June 14, 2027.
Remember, investors can currently trade only 4.24% of SpaceX’s total shares. The current float of approximately 555.6 million shares could multiply as these lockups expire over the next year. Circling back to the supply-and-demand dynamic, a steadily growing float puts a thumb on the supply side of the scale.
Looking at where SpaceX’s share price might go from here
Meanwhile, SpaceX still trades at a $2 trillion market cap, approximately 110 times its 2025 revenue of $18.6 billion. It remains one of the market’s most expensive stocks, even after the recent dip. High valuations create high expectations. The selling pressure could intensify if SpaceX cannot deliver the growth to justify such a high valuation.
There are several reasons to love SpaceX as a long-term investment. That said, the stock’s quick dip from $225 could be a warning sign of how quickly SpaceX can shed value if market sentiment turns against it. Understanding how the float will expand over the coming year will help investors weigh the risks of buying shares now versus waiting for the dust to settle.
Should you buy stock in Space Exploration Technologies right now?
Before you buy stock in Space Exploration Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Space Exploration Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $400,101!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,212,683!*
Now, it’s worth noting Stock Advisor’s total average return is 911% — a market-crushing outperformance compared to 208% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
