SpaceX, the space technology giant, saw its stock price fall below $135 for the first time since its initial public offering (IPO) on Wednesday, July 15, hitting a low of $132.28. Although it managed to close slightly higher at $135.27, this serves as the latest warning sign of cooling market enthusiasm.
Just over a month ago, SpaceX completed the largest IPO in history, making its CEO Elon Musk the world’s first “trillionaire.” The company, which operates in the fields of rockets and artificial intelligence, saw its market value surpass $2.6 trillion last month, briefly exceeding tech giants like Microsoft and Amazon in terms of valuation.
However, as the market reevaluates its worth, SpaceX’s market value fell to $1.78 trillion as of Wednesday afternoon.
Wall Street analysts point out that the reversal in SpaceX’s stock price partly reflects investors’ concerns about the company taking on debt to cover its AI spending.
SpaceX raised $25 billion through the bond market last month to finance the construction of costly technological infrastructure. However, whether these investments will yield sufficient returns remains a subject of debate on Wall Street. Additionally, market concerns about a potential interest rate hike by the Federal Reserve could further deflate the valuations of high-flying tech stocks.
Critics highlight that SpaceX incurred a $4.9 billion loss last year, and many of its ambitious projects have yet to be validated, suggesting that its valuation may have been overly inflated.
Despite being included in major indices like the Nasdaq 100, SpaceX’s stock has dropped by around 13% since its inclusion.
Steve Sosnick, Chief Market Analyst at Interactive Brokers, remarked, “There hasn’t been anything recently that would remind people of the catalysts they initially considered when buying SpaceX stock.”
He added, “A stock dipping a few dollars below its IPO price isn’t in itself a tragedy, but SpaceX is closely watched and has a significant impact on investor sentiment.”
In addition to valuation and interest rate factors, the need for some shareholders to cash out may also put pressure on SpaceX’s stock price.
Justus Parmar, CEO of SpaceX investment firm Fortuna Investments, stated, “There is an unspoken understanding that many people hold this stock, and some, even a substantial portion, may wish to liquidate part of their holdings, which is putting significant pressure on the stock price.”
He further noted, “We may already be seeing some of this dynamic, and we can expect more of it in the coming months.”
The focus will now shift to SpaceX’s first post-IPO financial report, expected to be released in the first week of August.
Following the financial disclosure, the lock-up period for early employees and some early shareholders eligible to sell part of their holdings is expected to expire, potentially exerting further pressure on the stock price.
Meanwhile, investors are closely watching the 13th test flight of the Starship. The success of the Starship development is crucial for reducing launch costs and advancing long-term projects like orbiting data centers and lunar missions.
Despite short-term stock price fluctuations, Parmar emphasized that this “experiment” is still in a very early stage.
He said, “This experiment has only been going on for about 30 days, it’s still very early. The key is that Musk has secured $85 billion to propel SpaceX into the next growth phase. It will take years to see the results, not just 30 days of trading to draw conclusions.”