SpaceX (SPCX) has had a rocket-like journey as a public company. It debuted just eight weeks ago to much fanfare. The stock flew higher, from its $135 initial public offering (IPO) price to more than $225 a share. After a bulls-versus-bears battle in the price range of $150 to $170, the bears won — at least for now.
Here’s the stock, which closed below $115 on Monday. Yet, technically, this chart of two-hour prices hints at a rebound. After being cut in half, that’s a start at least.
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www.barchart.com How Will SPCX React to Earnings?
SpaceX enters a pivotal period as it confronts two major catalysts within a 48-hour window — its inaugural quarterly earnings report following its June IPO, followed almost immediately by the expiration of its insider share lockup agreement.
That likely means a ton of stock for sale, regardless of earnings, since there are many long-term shareholders for whom this is the first liquidity opportunity. That includes a mix of employees and institutions.
The Inaugural Earnings Report on Tuesday after the bell will give Wall Street its first audited look at SpaceX’s balance sheet, revenue, and operating margins as a public entity. Analysts are watching four core areas:
Starlink Unit Economics: Subscriber counts, average revenue per user (ARPU), and cash-flow generation. Starlink represents the primary valuation driver for the business. Launch Margins: Operating profitability across the Falcon 9 and Falcon Heavy launch programs. Starship Capital Expenditure: Cost guidance and development timelines following recent test flight setbacks. M&A Integration: Updates on the $60 billion all-stock acquisition of AI coding platform Cursor, which diluted early public shares shortly after the listing.SpaceX’s Upcoming IPO Lockup Expiration
Then, on Thursday, the post-IPO lockup agreement expires, releasing an estimated 911 million pre-IPO shares held by insiders, employees, and early venture investors. That’s more than $125 billion in potential stock supply. Someone needs to take the other side of that massive trade.
Ahead of Aug. 6, the active public float accounts for only 4% to 5% of total shares outstanding. The lockup expiration expands the eligible pool of tradeable shares significantly beyond the original IPO size.
With all of this making for an eventful August for SPCX true believers and speculators alike, what is the range of possible outcomes here?
On the bearish side, when that much stock unlocks into a market with a limited public float, even modest institutional or insider profit-taking creates persistent selling pressure. The type that can overhang a stock for days or weeks, since it can’t all be gobbled up by buyers so quickly. And it won’t be like the IPO, when some were figuratively climbing over people to get their hands on shares that, today, anyone can own for much less.
Some critical analysts also note that at a $1.4 trillion market capitalization, the stock trades at an elevated valuation relative to near-term cash flows. If earnings or guidance miss expectations, the combination of a fundamental disappointment and insider selling could force the stock to retest its recent low, and perhaps enter the land of the two-digit dollar stock price, below $100.
On the bull side, that 50% drop from the June highs indicates that the market has already aggressively discounted the upcoming lockup event. Given how quickly today’s market anticipates any little micro-sized adjustment like that, this could be at least a trading opportunity.
Sell the rumor, buy the news, so to speak. The majority of Wall Street analysts now covering SPCX would tend to agree.
www.barchart.com This seems to reflect their long-term belief in satellite broadband market share and launch dominance. If the company delivers strong Starlink growth figures and major insiders hold their positions, clearing the lockup date removes the primary technical uncertainty hanging over the stock, creating conditions for a price floor to form soon.
I see that potential in the chart. But that’s two-hour prices we’re viewing above, not my usual daily or weekly looks.
But as is the case so often these days, an investment starts as a trade. That trade allows for what is left of the mania surrounding momentum stocks to gradually diminish, so that anything close to fundamentals being incorporated into what moves stock prices will finally return to being a factor. Wouldn’t that be nice?
Rob Isbitts is a semi-retired CIO, former fiduciary investment advisor, and Barchart columnist. Check out his other work at ETFYourself.com (featuring the Fresh Charts weekly trading post), and ROAR.PiTrade.com, helping investors to better-manage their own portfolios.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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