SpaceX lock-up expiration to test market as shares shed $773bn since record IPO

IPO and early trading

SpaceX went public on June 12 at $135 per share, raising $86.25bn in the largest initial public offering ever. The float was less than 5% of the company, with no existing shareholders selling into the deal. Since then, the stock has fallen nearly 20%, closing at $108.37 on Friday. Between June and July, the company lost $772.8bn in market capitalisation, a record decline.

The lock-up schedule

Unlike the standard 180-day cliff, SpaceX and its underwriters adopted a staggered release structure. The first tranche, representing 20% of the total restricted stock to be freed over the initial 180 days, becomes saleable on Thursday, two days after the company's first earnings report. This unlocks 911.5 million shares, or 12% of total shares outstanding, more than the 640 million currently trading. Subsequent unlocks follow, with 28% of restricted stock released after third-quarter financials. Elon Musk and certain significant investors remain locked up for a full year.

Selling pressure and short sellers

Many early investors need to sell, according to venture capitalist Paul Kedrosky, who said they have pledged their stock to fund purchases.

They've pledged their stock to buy homes, private islands, cars, whatever.

Short sellers have piled in ahead of the unlock, betting on further price declines. Jay Ritter, the University of Florida economist known as Mr. IPO, noted that lock-up expirations typically put downward pressure on stock prices, and this one is unusually large because of the tiny initial float. He added that it is quite possible there will be a further dip. However, Ritter also pointed out that short sellers covering positions after the unlock could provide some support.

Distorting the S&P 500

The SpaceX IPO and its aftermath are also warping broader market metrics. Alphabet and Amazon reported significant unrealised gains from their investments in SpaceX and AI startup Anthropic. Those paper gains accounted for half of the $280bn rise in S&P 500 earnings this quarter. Overall earnings growth for the index stands at 47.4%, but drops to 28.8% when Alphabet and Amazon are excluded.

Broader market impact

The SpaceX debut may have marked a turning point for the AI trade. Since the IPO in June, chip stocks that had led gains this year saw sharp drops. The upcoming Anthropic and OpenAI IPOs are increasingly viewed as cautionary tales, with investor appetite for mega-cap tech listings showing signs of fatigue.