More than 900 million SpaceX shares are set to become available for trading on Thursday. Up to 911.5 million shares will be unlocked, allowing some employees and early investors to sell shares they received or bought before SpaceX went public. The share unlock could put more pressure on SpaceX stock. The company’s stock has already fallen sharply, and the arrival of hundreds of millions of additional shares could increase the supply available to investors and push the price lower.
SpaceX stock had a major fall on Wednesday. Shares of SpaceX, trading under the ticker SPCX, dropped almost 14% on Wednesday and closed at $108.27. It was the stock’s second-worst trading day on record. The stock is already at an all-time low. The latest fall comes only weeks after SpaceX completed what was the biggest IPO in history, making the timing of the share unlock especially important for investors.
SpaceX stock falls 14%
Investors are therefore dealing with multiple reasons for the stock’s volatility. “You have a few different things triggering volatile action in the name, all happening at the same time,” Ryan Lee, senior vice president for product and strategy at Direxion, told CNN. SpaceX had a huge IPO on June 12.
The company went public with less than 5% of its total shares available for public trading, meaning most of its shares were still locked and could not immediately be sold on the stock market. The bigger share supply could also affect SpaceX’s position in major stock indexes. More shares available for public trading could increase SpaceX’s weighting in indexes such as the Nasdaq 100.
SpaceX IPO share price
SpaceX’s stock initially surged after its IPO. A very small number of shares were available to trade, while interest from retail investors was extremely strong. The limited supply helped push the stock sharply higher. SpaceX is also trading well below its IPO target price. The stock is down around 20% from the $135 IPO price, showing how quickly investor sentiment has changed since the public listing.
Also read: SpaceX rocket crashes into Moon: What happened and what scientists found
SpaceX employee shares
Employees could have a strong reason to sell when their shares unlock. Some employees received or bought SpaceX shares long before the IPO, when the stock was valued much lower than today’s trading levels. That means some early shareholders could still be sitting on large profits. Even after SpaceX’s recent decline, employees who acquired shares at much lower prices could potentially lock in significant gains by selling.
The upcoming unlock could therefore bring natural sellers into the market. “With these employee share unlocks, you’re going to have natural sellers entering the market,” said Lee. “These are people who’ve (held the stock) far before it was printing at $135 on the IPO,” Lee told CNN.
But an unlock does not mean that all 911.5 million shares will immediately be sold. Employees and early investors will have the choice to sell their shares or continue holding them. When a private company becomes public, it normally does not allow every existing shareholder to sell immediately. Some shares remain restricted for a certain period.
A lockup period is designed to stop a flood of shares from hitting the market immediately after an IPO. Companies commonly use these restrictions to give the stock time to establish itself as a publicly traded security. The usual lockup period is around 180 days. Under a typical IPO structure, pre-IPO shareholders must wait about six months before they can sell their restricted shares.
SpaceX is using a different approach. Instead of relying on one standard 180-day deadline, the company has created a staggered and tiered schedule for releasing locked shares. The company has about 7.571 billion Class A shares, with most of them held by employees and investors. SpaceX also has almost 6 billion Class B shares. Most of these Class B shares are held by Elon Musk and other executives.
Elon Musk SpaceX shares
Thursday’s unlock is only one part of a much larger release of Class A shares. Additional unlocks later this year could eventually bring more than 5 billion Class A shares into the public market. Musk and other top executives face a longer lockup period. Their shares will remain restricted for longer than those covered by Thursday’s unlock.
Musk’s SpaceX shares are locked until one year after the IPO. His holdings are worth more than 40% of SpaceX’s total company value, making his future share unlock particularly important for investors, according to CNN.
SpaceX Nasdaq 100 weighting
SpaceX’s Nasdaq 100 weighting could change significantly. The company currently has a weighting of around 1% in the index. That weighting could potentially rise above 3.5%. Based on SpaceX’s current stock price and the addition of the 911.5 million unlocked shares, TD Securities estimates that SpaceX’s Nasdaq 100 weighting could rise above 3.5% after the September rebalance.
However, that estimate is not guaranteed. SpaceX’s final weighting will depend partly on how its stock price performs before the index is rebalanced. More shares available for investors to buy and sell can increase selling activity, particularly when early shareholders decide to take profits. But the share unlock does not automatically change SpaceX’s underlying business. The company’s future performance will still depend on its business growth, financial results, AI spending and ability to deliver on its long-term plans.
SpaceX investor Justus Parmar said investors should look beyond the short-term share pressure. “An influx of new shares can weigh on any stock in the short term, but that doesn’t change the underlying picture,” Parmar, founder and CEO of Fortuna Investments and a SpaceX investor, said in an email to CNN. Parmar said the bigger questions are about SpaceX’s business and Elon Musk’s execution. He said what matters most is the strength of the business and Musk’s ability to execute his long-term vision. For SpaceX, the IPO boom has quickly turned into a test of investor confidence.