SerpApi.Org
Just over a month since its historic initial public offering, SpaceX has delivered one of the weakest post-debut performances of any major U.S. listing since the end of the Great Recession.
A Barron’s analysis found that the stock has performed worse than 90% of other U.S. IPOs with market capitalizations of $1 billion or more since July, 2009.
Over the first 27 trading days, SpaceX was down 23% from its first day closing price of $161. Across 955 public offerings, the typical IPO returned 0.8% over the equivalent period.
On Tuesday, SpaceX broke a seven-day losing streak in which the shares fell 21%, gaining 3.1% to $123.54 by market close.
SpaceX IPO price was $135, but it is now trading below that price. The IPO was made available to large numbers of retail investors, unlike the typical IPO that is largely only available to institutional investors or those with large brokerage accounts.
Poor IPO performance doesn’t determine a company’s long-term trajectory. Meta Platforms ultimately rewarded patient investors after its rocky debut, but the turnaround was far from immediate. In the months following its public listing, Meta came under renewed pressure after the lock-up period expired and insiders were free to sell.
SpaceX faces a similar challenge: beginning in August, billions of previously restricted shares are expected to become eligible for sale, increasing the supply of stock at a time when demand has already weakened.
Not all of those shares will hit the market at once. Shares held by founder Elon Musk are locked up until June 2027 and cannot be sold earlier. Together with holdings from other major pre-IPO investors, this group accounts for roughly 7.8 billion shares, or about 60% of the company’s 13 billion in outstanding shares after the IPO.
Other investors face shorter lock-up periods, with some shares beginning to unlock after second-quarter earnings in August and additional tranches becoming available over the following months. Goldman Sachs, which led the IPO, also has authority to waive certain lock-up restrictions before they expire.
Analysts at Renaissance Macro say the stock’s staggered lockup is “investor-friendly relative to the standard 180-day cliff,” but doesn’t entirely mitigate selling pressure tied to the events. Historically, major lock-up expirations have often weighed on demand for momentum stocks in the weeks around the event.
Others argue that SpaceX’s inclusion in major stock indexes will trigger substantial buying from index-tracking investors, helping offset selling pressure.
SpaceX has already joined the Russell 1000 and Nasdaq 100 indexes, after rule changes for megacap listings fast-tracked the stock’s inclusion.
The stock could join the S&P 500, after trading publicly for at least a year and meeting the index’s profitability requirements. Because trillions of dollars track the S&P 500, inclusion could drive significant long-term demand for SpaceX.
Write to Elijah Nicholson-Messmer at [email protected]