By Suzanne McGee and Akash Sriram
PROVIDENCE, Rhode Island, Aug 4 (Reuters) – The next test for SpaceX investors following its first earnings report as a public company comes on Thursday, when as many as 912 million shares held by employees and other pre-IPO stakeholders become eligible for sale.
Insiders who acquired stakes in the space and AI company months or years before its June listing at a fraction of the $135 per share IPO price stand to make big gains with their share lockup expiring, but their sales could add fresh pressure on the stock, which has slumped 49% from its June high.
Heavy selling is expected, but determining who is getting out or trimming stakes will be key to market sentiment on the company’s prospects, fund managers, brokers and analysts said.
“This has to be the most talked-about lockup in the history of IPO lockups,” said Robert Hackel, CEO of institutional brokerage firm R.F. Lafferty & Co.
He has been fielding calls from pre-IPO investors eager to use the opportunity to sell some of their SpaceX holdings in order to snap up privately-traded stock in other IPO candidates such as AI giants Anthropic and OpenAI and defence technology startup Anduril Industries.
“You are going to see a lot of exits,” he said.
Selling will be hard to resist for SpaceX’s employees and early investors as they are “sitting on such massive gains that they’ll have a very strong incentive to realize a return and diversify their holdings,” said Matt Kennedy, senior strategist at Renaissance Capital, a provider of IPO-focused research and investment funds.
On Tuesday, SpaceX shares fell 7.5% in after-hours trading after SpaceX reported a stronger-than-expected 92% jump in revenue for the second quarter. They continued to trade lower even though CEO Bret Johnsen told listeners on the earnings call that the company is on track to record annualized revenue of $100 billion by the end of the year.
The lockup expiry may be to blame, said Brian Mulberry, chief market strategist for Zacks Investment Management.
The selloff “seems more sentiment driven, as media reports are that many insiders will look to sell on the strong results this week as their shares become fully vested,” Mulberry said.
ALL EYES ON WHO SELLS DOWN THEIR STAKES
Lockups are common after IPOs, preventing insiders from selling shares for a set period. But SpaceX’s is unusual because the banks staggered the releases over nearly a year rather than allowing billions of shares to become eligible on a single day.
By the time the process is over in the middle of next year, an additional 12.9 billion shares will be freed up for trading.
The current float is so small that the first lockup expiry alone could more than double the number of shares available for trading, and if a price-based early-release provision is triggered, it could more than triple the public float.
“This time, it’s a multiple of the shares outstanding that will make their way onto the market, not a fraction, so these lockups will be an interesting test of the commitment of early investors to stand by the company for the long haul,” said Andrew Chanin, CEO of Procure AM, who manages the Procure Space ETF. The fund is tied to an industry index that invests about 6% of its assets in SpaceX.
A large sale by an early backer could send a strong sign about the level of confidence in SpaceX’s outlook, said Lukas Muehlbauer, a research associate at IPOX.
To gauge the likelihood of a heavy selldown, Gabriel Shahin, founder of Falcon Wealth Planning, is tapping his contacts among SpaceX insiders and employees. His takeaway: none appear to be eager to sell.
“They’re long-term believers in SpaceX, and as a result we tend to be more bullish on insiders also not selling and what that says about the stock,” he said.
But Shahin acknowledges that each of the upcoming lockup expiry dates is likely to make trading more turbulent. Already, SpaceX’s volatility is making it difficult for many investors who want to protect themselves from any further declines in the share price to hedge as options prices reach levels that are “sheer insanity,” Shahin said.
(Reporting by Suzanne McGee and Akash Sriram; Editing by Sonali Paul)
Comments