SpaceX Share Unlock May Introduce Further Stock Volatility

The first group of early SpaceX investors is scheduled to gain the ability to liquidate a segment of their investments on Thursday, coincident with the lapse of initial lockup periods. This development could exert pressure on the stock, which has already seen a decline exceeding 50% from its mid-June peak.

More than 911 million SpaceX shares are becoming eligible for trading, constituting approximately 7% of the total outstanding shares. This volume surpasses the 639 million shares initially sold during the company's record-setting initial public offering (IPO).

Initially, the rocket manufacturer, led by Elon Musk, experienced a rapid ascent in its stock price, reaching $150 upon its Nasdaq debut in June and subsequently climbing past $225 within days. However, the subsequent eight weeks have been turbulent, culminating in the shares closing at a low of $108.27 on Wednesday.

The stock’s downturn followed SpaceX's disclosure in its inaugural earnings report on Tuesday that its capital expenditures were more than double its revenue. Greg Martin, co-founder of Rainmaker Securities, suggested that the expiration of the lockup period could have a more significant short-term impact on the stock's trajectory than underlying fundamentals or strategic decisions.

Further share releases are anticipated. An additional 319 million shares are projected to become available on August 20, followed by approximately 700 million in September and a similar quantity in October, according to the prospectus. Elon Musk, the world’s wealthiest individual, remains SpaceX’s largest shareholder, possessing over 6 billion shares, which are locked until June 2027.

Mizuho analysts noted in a Wednesday report that while the potential increase in supply is substantial, investors should recognize that eligibility for sale does not guarantee the entire tranche will be introduced into the market.

Among those intending to sell is Jessie Bates III, a safety for the Atlanta Falcons. Bates, 29, invested approximately $150,000 in 2022 when SpaceX was valued at $127 billion. With SpaceX's current valuation at $1.43 trillion, Bates's stake could now be worth over $1.5 million. He expressed plans to sell all his shares to “lock in gains,” as conveyed by his publicist.

Michael Ledo, CEO of RISE Family Office, manages Bates's investments. Ledo indicated that Bates's portfolio has previously included stakes in pre-IPO companies such as OpenAI, Anthropic, Databricks, Cart.com, and Turo. RISE focuses on assisting athletes in wealth accumulation, leadership development, and family building.

Bates, through his publicist, mentioned that strategic acquisitions that foster growth opportunities could potentially sway him to repurchase shares. Earlier this year, SpaceX merged with Musk's xAI in a deal valuing the combined entity at $1.25 trillion. Furthermore, prior to its IPO, SpaceX reached an agreement to acquire Cursor for $60 billion, a transaction expected to conclude this quarter.