SpaceX share price crashes back to earth following results
Having smashed through the record for the largest initial public offering (IPO) in history back in June, SpaceX (NASDAQ:SPCX) announced results for the first time as a public company on 4 August.
SpaceX’s IPO saw its shares skyrocket, gaining 19% on their first day and a further 25% over the following two sessions.
But by market close on 4 August, ahead of the earnings release, they had fallen to $125.33 – 7% below the IPO price of $135 and 44% below the $225.64 peak they reached on 16 June.
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And the reaction following results exacerbated this crash-landing. The stock opened more than 10% lower on 5 August, the day after the results, despite some impressive headline figures. Increased spending seems to have spooked many investors.
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“Part of a SpaceX rocket crashing into the moon this morning is probably a good metaphor for the share price performance so far,” said Chris Beauchamp, chief market analyst at investing and trading platform IG.
Revenue was encouraging, increasing 92% year-on-year to $7.8 billion. Analysts polled by LSEG had yielded a consensus forecast of $6.9 billion, so this represented a healthy beat – at least in theory.
“It’s so early in [SpaceX’s] life as a public company, that beating consensus carries little real weight,” said Matt Britzman, senior equity analyst at investment platform Hargreaves Lansdown. “Analysts are still trying to work out what the business should look like.”
Rather than these estimates, investors appear to have focused on the negatives, including rising costs across all segments – particularly artificial intelligence, where spending rose by $1.6 billion.
Across the business, losses narrowed to $541 million from $1 billion, and Elon Musk moved the company’s target date to achieve $1 trillion in annual revenue forward by a year, from 2031 to 2030. SpaceX’s stock market debut has already made Musk a trillionaire.
So has the market response to SpaceX’s results been justified – or could there be headwinds on the way?
How might lock-up expiries impact SpaceX shares?
The selloff following the earnings announcement could be just the start of the trouble for SpaceX’s share price.
Later this week, the first of a series of lock-up periods for longstanding SpaceX shareholders expires, and market research firm Morningstar predicts this could lead to a wave of selling.
Lock-up periods are a period of time following an IPO during which pre-existing shareholders cannot sell their shares (for the most part, these are company insiders and any investment trusts or other institutional investors that invested in the company when it was private).
In theory this protects new investors from a sharp selloff once the company goes public – because these pre-existing shareholders are, in theory, heavily incentivised to realise some of the value or profits from their shareholdings when a company lists. Staggering the periods at which they can sell gives the share price a chance to stabilise on the public market.
SpaceX’s lock-up periods expire in multiple tranches between 6 August and the one-year anniversary of the IPO.
Each lock-up window expiry provides an opportunity for longstanding shareholders to bank profits, and the expectation is that many of them will.
This usually sees a dip in a company’s share price as there is a sudden influx of sellers.
This is exacerbated in SpaceX’s case as it sold just 5% of its shares at IPO – compared to around 20% which is more usual. That means there’s a relatively large amount of shares about to hit the market when the lock-up periods expire.
Matthew Kennedy, senior strategist at investment bank Renaissance Capital, told Morningstar that “SpaceX has the longest series of lock-up releases we’ve ever seen”.
At the very least, these could see SpaceX’s share price continue to fluctuate over coming weeks.
“[In the near term] lock-up expiries, a growing public float and upcoming Starship launches are likely to keep the shares volatile,” said Britzman.
