NEW YORK: The dip in SpaceX’s shares below its blockbuster IPO price of US$135 (RM550) a share is an ominous sign for Elon Musk’s internet and rocket company as it faces more potential volatility in early August, when the number of shares available for trading on the Nasdaq stands to increase significantly.
The company’s stock on Wednesday dipped as low as US$132.15 before closing at US$135.27. It has now tumbled 33% from its record close in the immediate days after the public sale raised a record US$75 billion on June 11.
Even after that steep decline, it remains one of Wall Street’s most valuable companies with a market capitalisation of roughly US$1.8 trillion.
While SpaceX’s IPO was the largest in US history, it made less than 5% of its shares available for stock market trading, making investors fight for a scarce number of shares that helped value the company at US$2.1 trillion after its first day on the Nasdaq. So-called “lockup” restrictions on insiders will lift in coming months, potentially flooding the market with additional shares.
“We think at this level, it’s relatively safe to at least be involved from a trading perspective,” said Jay Hatfield, CEO of Infrastructure Capital Advisors in New York. “We won’t overweight it because they do have the lockup coming.”
The stock is valued at 49 times expected revenue following the selloff, still one of Wall Street’s priciest stocks by that measure. By comparison, Tesla – another Musk-backed investor favourite – recently traded at a revenue multiple of 15.
Bullish analysts and investors say SpaceX warrants a high premium because of its profitable Starlink internet service, its government rocket launch business, and Musk’s track record commanding investor loyalty, even though it reported a net loss of nearly US$5 billion last year.
Of the 32 analysts with ratings on the stock, 27 recommend buying, while just one recommends selling and four are neutral, according to LSEG data. A Reuters analysis of 50 high-profile US IPOs since 2010 showed that companies whose shares fell below their IPO price in the first two months after their market debuts have gone on to underperform those that didn’t, even though most still posted gains.
Twenty-one of the 50 companies fell below their IPO price in their first two months; those stocks have a median increase of 61% since their debuts, compared with a median gain of 112% for the remaining 29.
A series of restrictions on additional stock sales by insiders, employees and early investors will lift over the next several months.
In the first of those releases, rank-and-file employees and some early investors will be free to sell 911.5 million shares on the second trading day after the company’s debut quarterly report.
The company has not announced the date of its first earnings report, which analysts expect in early August.
Those eligible shares are currently worth about US$123 billion, eclipsing the US$86 billion worth of shares currently available for trading on the Nasdaq.
An additional 455.8 million shares will be eligible for sale if SpaceX’s stock price stays above US$175.50 for at least five of the 10 consecutive trading days through the date of the company’s upcoming quarterly report.
