Rockets go up, but they can also go down. So can the stocks of the companies that launch them. We’ve seen that happen a couple of times already in the brief period since Space Exploration Technologies’ (SPCX +2.22%) record-setting initial public offering (IPO) in June.
The most recent surge for SpaceX’s stock came, perhaps surprisingly, following the Aug. 6, 2026, lockup period expiration. Many investors feared this event would cause the stock to sink. Instead, the opposite occurred, with SpaceX’s stock bouncing as much as 35% off its lows.
However, SpaceX’s second lockup expiration arrived on Aug. 20. This time, the stock slid. The recent pullback raises a key question: Is SpaceX’s recovery real, or is it a trap for investors?
Image source: SpaceX.
Behind SpaceX’s recovery
It makes sense why many investors expected SpaceX’s initial lockup period expiration on Aug. 6 to cause problems for the stock. Stock prices follow the law of supply and demand like the prices of other products. A wave of insider selling made possible by the lockup expiration created more supply of SpaceX’s shares available to the public, so the theory was that the stock’s price would naturally fall.
However, this theory didn’t fully take into account the demand part of the law of supply and demand. When demand increases more than supply, prices rise. And the demand for SpaceX’s stock was significant.
Another thing to keep in mind is that the stock market is forward-looking. Investors knew that the Aug. 6 lockup period was coming. SpaceX’s stock declined in the weeks leading up to this milestone, in part because of investors’ worries.
Importantly, the initial lockup expiration came right after SpaceX reported impressive second-quarter results. Sure, the company posted a hefty loss due mainly to increased artificial intelligence (AI) infrastructure spending. But SpaceX’s Q2 revenue of $7.81 billion easily beat the consensus Wall Street estimate of $6.93 billion. Bullish analysts stuck with their forecasts. Some even upgraded their price targets for the space stock.
Space Exploration Technologies
Today’s Change
(2.22%) $2.97
Current Price
$136.97
Key Data Points
Market Cap
Day’s Range
$131.22 – $137.35
52wk Range
$104.83 – $225.64
Volume
78.8M
Avg Vol
122.1M
Why the Aug. 20 lockup could be different
Why didn’t SpaceX’s stock jump after the Aug. 20 lockup expiration? I think this time is different for three main reasons.
First, SpaceX’s second lockup expiration occurred one day after the U.S. Treasury announced plans to double its purchase of long-term Treasury bonds to at least $4 billion. This move rattled the stock market as bond yields rose despite the announcement.
Second, SpaceX closed its acquisition of AI coding tool company Cursor on Aug. 14. SpaceX issued roughly 389.3 million new shares to fund the deal. This large number of shares added to the insider selling following the Aug. 20 lockup expiration could be causing the law of supply and demand to work against SpaceX’s shareholders.
Third, investors anticipate the next lockup expiration on Dec. 8. This one will be a biggie: All remaining restricted shares held by insiders (except Elon Musk) will be eligible for sale. The fears that were present in the weeks leading up to the first lockup expiration on Aug. 6 could come back in force with the full 180-day lockup expiry.
Real recovery, real risk
Don’t get me wrong: SpaceX’s recovery from its post-IPO sell-off is real. Worries about massive insider selling causing the stock to tank turned out to be overblown. Wall Street remains optimistic about SpaceX.
Many investors continue to find the stock attractive. That’s understandable, considering SpaceX’s robust growth and tremendous growth opportunities. If Musk’s vision of hosting AI apps in space becomes a reality, SpaceX could deliver fantastic long-term returns.
However, the risks for SpaceX are real, too. The recovery could very well turn out to be a trap for investors. The increase in supply of SpaceX’s shares resulting from the lockup expiries and the Cursor acquisition could be greater than the demand for the stock.
My view is that SpaceX has a good shot at being a big winner for investors over the next 10 to 20 years. But because of the likelihood of intense volatility amid significant uncertainty, I’m leery of the stock over the short term.
Source link
