SpaceX shares climb After $100bn insider lockup expires

SpaceX shares rose on Thursday as investors digested the release of as many as 911.5 million shares worth about $100 billion from lock-up agreements that had prevented insiders from selling them.

The stock closed up 6.1% after fluctuating between gains and losses of less than 3% in early trading. More than 255 million shares changed hands, the most since the first week of heavy trading following its debut. The move came after a 14% slump on Wednesday as investors balked at SpaceX’s higher-than-expected spending on artificial intelligence in its inaugural earnings release, though Wall Street analysts remained bullish overall.

Despite a roller coaster ride in its shares since SpaceX’s debut, many of the company’s early investors and long-serving employees are sitting on paper gains even at prices well below the $135 per share where the firm sold stock in its record initial public offering in June.

“The heavy trading volumes suggest some early investors probably did sell, but the fact that the stock still rose shows there was enough demand to absorb that supply,” said Charu Chanana, chief investment strategist at Saxo Markets. “Earnings were not fundamentally weak, and with the shares trading below the IPO price, many insiders may have decided that this was not an attractive point to exit.”

Thursday’s release increases the total number of shares available to trade to 1.55 billion from the 639 million in circulation when Space Exploration Technologies Corp, as it’s formally known, went public.

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SpaceX shareholders who bought during the IPO or after will have to face more lockups ahead. Bernstein analysts called the schedule “an unusually complex scheme with nine main unlock points instead of one traditional 180-day expiry.”

In June 2027, in one of the last scheduled unlocks, Musk’s 6.4 billion of Class A common stock will become eligible to trade.

Short sellers took notice of the overhang and ramped up bets against SpaceX. Short interest as a percentage of float — a proxy for bearish sentiment — was 36% as of Wednesday’s close, according to data from S3 Partners LLC. The cohort amassed paper gains of more than $9 billion on the stock’s slump.

While SpaceX’s lofty valuation and ambitions have drawn plenty of sceptics, a sizeable share of these short-selling investors were likely positioning to profit from locked-up insiders finally moving to cash in their stakes.

“Some investors may have been running shorts ahead of the lockup expiry, so there could have been some covering as well,” said Vey-Sern Ling, a managing director at Union Bancaire Privee. “Pre-IPO investors don’t have to sell immediately when they’re unlocked just because they’re sitting on profits, especially if they think there’s further upside.”

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Meanwhile, in the options market, trading has been elevated in recent days, reaching a peak on Wednesday. On Thursday, as almost 1.8 million contracts traded, an investor sold more than 14,000 Sept. $70 puts, indicating a bullish bias. Large, opening blocks of 5,000 June $220 calls and 7,500 June $90 puts also changed hands simultaneously.

Wall Street banks and trading desks around the world have spent weeks preparing for the lifting of restrictions and the knock-on effects of a flood of shares available for trading.

Some investors bought into special-purpose vehicles to acquire even fractions of shares in xAI, now known as SpaceXAI, and SpaceX in the run-up to the June IPO. Many will now await initial distributions from the managers of the SPVs in the days and weeks after Thursday’s lockup expires.

A key debate among investors has been over who the incremental buyer of unlocked shares is beyond short sellers covering their positions. Retail investors rushed to buy the post-earnings dip on Wednesday, with an inflow of about $22.7 million of retail demand in the first hour of trading, according to data from Vanda Research.

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