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SpaceX rebounds from post-earnings slide as investors eye lockup expiry

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Aug 6 : SpaceX shares recovered from a steep post-earnings selloff, even as investors remained watchful of the impact of potential insider selling on the stock, which has had a turbulent run since its market debut.

Shares of the Elon Musk-led company were last trading 6.4 per cent higher at $115.20 on Thursday, after falling as much as 2.9 per cent earlier. It had tumbled 13.6 per cent on Wednesday.

When a company goes public, its executives, employees and early investors are typically barred from selling their shares for up to 180 days under lock-up agreements designed to curb volatility and support the stock.

SpaceX, however, had an unusual arrangement under which up to 20 per cent of the restricted shares could be sold starting Thursday, the second trading day after its second-quarter earnings release.

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“This week’s noise around the first lock-up expiring should be treated as just that: noise,” said Nick de la Forge, co-founder and general partner at investment firm Planet A.

Still, analysts worry that the new supply of shares could exacerbate pressure on the stock. A lock-up expiration does not require insiders to sell, but such events are viewed cautiously.

“Employees and early investors might want to secure their profits or invest in other opportunities,” said Carolane de Palmas, market analyst at ActivTrades.

“Even without heavy selling, the increase in available shares is likely to keep volatility elevated.”

FRAGILE SENTIMENT

SpaceX is at a critical juncture after a steep selloff left its shares trading below their $135 IPO price for three straight weeks, a sharp reversal from June when the stock’s surge briefly pushed the company’s valuation close to $3 trillion, surpassing Microsoft and Amazon.

High AI bills, which the company disclosed in its first earnings report after going public, have also stirred concerns over the costs of data centers and chips.

The retreat has left the company underperforming tech stocks.

Since its June 12 debut, SpaceX shares have lost more than a quarter of their value, while the tech-heavy Nasdaq Composite has gained 2.2 per cent.

The Roundhill Magnificent Seven ETF, which tracks a group of mega-cap technology companies with far longer track records as publicly traded firms, has risen 4.8 per cent.

However, SpaceX is “a company that has successfully achieved incredible efficiencies in both launch and satellites, and it is already applying that mentality to building AI infrastructure,” said Micah Walter-Range, a space industry specialist who helped develop the index tracked by the Procure Space ETF.

Some investors also argue that the company remains a once-in-a-lifetime opportunity, and contend that the focus should be on its long-term prospects.

“We invested in SpaceX for the long term. This is a 10-year trade for us,” said Phillip Lord, CEO of Bitcoin Japan, which has invested in SpaceX.

“You’re worried about 5 per cent, 10 per cent or 20 per cent potential downside on a stock move. This guy’s disrupting the world,” he added, referring to Musk.

Musk has said SpaceX may bring in $1 trillion in revenue by 2030.

Source: Reuters

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