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SpaceX stock surged 67% from its IPO price, reaching over $225, driven by limited supply and high demand, valuing the company at $2.5 trillion.
Heavy call option buying, ETF inflows, and upcoming Nasdaq-100 inclusion are fueling demand for SpaceX shares, despite limited availability.
SpaceX will stagger lockup expirations, releasing significant portions of shares from late July through December, potentially increasing supply and impacting price.
Elon Musk fans may think that SpaceX is poised to change the world, but a big reason its stock rocketed to a peak north of $225, up 67%, from its initial-public-offering price, is good old-fashioned supply and demand.
As employees and early investors are permitted to sell shares in the coming months, SpaceX shares should come back to Earth, as they have with some other hot IPOs.SpaceX stock has been on fire since its first trading day on June 12 as investors look for CEO Musk to repeat—or even exceed—his success running electric-vehicle maker Tesla. SpaceX shares rose for three consecutive days, closing at $201.80 on Tuesday, but have slipped back to $185 since then. There are just 639 million shares available for trading, a fraction of the more than 13 billion shares that SpaceX has outstanding.
Much of that 639 million has been snapped up by long-term shareholders, including money managers Ron Baron of Baron Capital and Cathie Wood of ARK Invest, and retail shareholders who have consistently bet on Musk, no matter how things appear to be going at his companies. For now, SpaceX is a $2.5 trillion company that, amazingly, just doesn’t have enough shares to go around.
“SpaceX is the new meme stock,” says Future Fund Active exchange-traded fund co-founder Gary Black. “This will end badly for investors paying $200 per share or more.”
That the sixth-most-valuable company on the planet can be a meme stock is debatable. But Black is right to point out that trading considerations are more important than fundamentals right now
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The tight supply of SpaceX shares was exacerbated by the debut of SpaceX stock options on Tuesday. Those options were among the most actively traded, despite the relatively small number of shares available to trade. Call options, which give the holder the right to buy stock at a fixed price in the future, were more popular than puts.
Heavy call buying creates upward pressure on stock prices. A SpaceX call seller has risk if the stock rises. To hedge that risk, the call seller can buy some SpaceX stock, which can create a feedback loop where rising prices necessitate more buying to hedge options positions.
The flow of funds into ETFs like the Direxion SpaceX Bull 2x —designed to give investors twice the return of SpaceX stock in daily trading—also forces more shares to be bought. What’s more, SpaceX will enter the Nasdaq-100 on July 6, which will force even more buying by index funds. Initial buying might amount to $7 billion to $10 billion.
That’s a good chunk of the $86 billion that SpaceX raised in its IPO. The supply issue is ultimately temporary. Many traditional IPOs include a provision preventing insiders and early investors from selling stock for 180 days. SpaceX isn’t doing that. Instead, it is staggering its lockup."
https://www.barrons.com/articles/spacex-stock-pric... 