The first major lockup expiration for SpaceX, which occurred on August 6, has been a significant concern for Wall Street since the company's June IPO. Early investors were allowed to sell their shares, potentially flooding the market with millions of shares. However, the anticipated selling pressure has failed to materialize, and the stock has instead rallied sharply.
In the five trading days following the lockup expiration, SpaceX shares surged 35%, adding approximately $500 billion to the company's market capitalization. The stock has now climbed back above its $135 IPO price, alleviating fears of a massive sell-off and calming investor anxieties about future lockup expirations.
Andrew Plumb, a managing partner at Rockshack Capital and a SpaceX shareholder, noted that the market's biggest hurdle has been cleared. "The largest risk is uncertainty. The market often overprices negative events, and when the event actually happens, things are usually not as bad as anticipated," he said.
The company, led by Elon Musk and operating in space, satellite, and AI sectors, has experienced volatile trading since its IPO on June 11. The stock initially surged, then declined, erasing over $1 trillion in market value by early August. The lockup expiration was seen as another major risk, but the impact proved fleeting.
Gene Munster, a managing partner at Deepwater Asset Management and a SpaceX shareholder, commented that the stock's price level before the lockup helped mitigate selling pressure. "If the stock were at $225, I think it would be very difficult to hold off selling," he said. He also noted that institutions remained cautious and waited for the market to stabilize before the lockup expiration.
SpaceX's lockup schedule differs from typical IPOs, where insiders are usually locked up for 180 days. Due to the company's massive size and the potential for volatility, management and investment banks designed a nine-stage phased release plan. The first lockup, the largest, freed 911.5 million shares, more than the number of shares sold in the IPO. The next lockup, set for August 20, will release up to 319 million shares, representing 7% of the total restricted shares. Additional batches of the same size will be released over the coming months until Musk's 6.4 billion shares become free in June 2027.
The day before the lockup expiration, SpaceX shares fell 14%, but the trigger was not the lockup itself. Instead, the company's first earnings report, which showed higher-than-expected AI capital expenditures, spooked investors. However, the report also contained positive news, including revenue that significantly exceeded expectations and a smaller-than-anticipated per-share loss. This earnings report acted as a key catalyst for the stock's subsequent rally.
Munster explained that after the initial drop, investors realized the stock was not entering a freefall. "They started to re-examine the quarterly report and found that the company's business operations are progressing well overall," he said.
During the earnings call, Elon Musk made bold predictions, stating that SpaceX's annualized revenue could exceed $100 billion by the end of the year and that the company could achieve $1 trillion in annual revenue by 2029 or 2030. Plumb noted that the strong earnings report helped offset the pressure from the lockup expiration. "The robust financial data can attract new buyers at current prices, absorbing the selling pressure and preventing the stock from falling," he said.
Some investors are not surprised that SpaceX is defying the typical lockup trend. While lockup expirations usually depress stock prices, Musk's influence changes the market dynamic. David Wagner, a portfolio manager at Aptus Capital Advisors and a SpaceX shareholder, pointed out that early investors in the space sector may not be solely focused on fundamentals. "They identify with Elon himself and his vision. The holding power of such capital may be stronger than expected. They are betting on Musk, not on short-term profits, project milestones, or free cash flow," he said.
Munster also noted that the stock's price being significantly below the IPO price before the lockup expiration helped suppress selling intent. He predicts that future lockup windows could follow a similar pattern: the stock price will dip before the expiration, then rebound, provided that insiders do not sell in large quantities.
For SpaceX investors, the core takeaway is that as more shares are unlocked and market expectations for the company's future continue to evolve, the stock price is likely to remain highly volatile. Reese Williams, chief strategist at Wave Capital, commented, "The stock will continue to experience significant volatility. On one hand, investors worry that the company's vision is grand but cash flow generation is years away. On the other hand, the market is inspired by Musk's blueprint and the enormous growth potential. Bulls focus on the long-term outlook, while bears are fixated on the high ongoing capital expenditures."
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