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Since SpaceX went public, Wall Street had been dreading Aug. 6, when the lockup preventing investors from selling expired. Read on
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Since SpaceX went public in June, Wall Street had been dreading Aug. 6, when the first lockup preventing early investors from selling the stock expired and millions of shares were set to flood the market.
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or View more offersArticle contentThey needn’t have worried.
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SpaceX shares have been on a tear since the lockup ended, soaring 35 per cent in just five sessions, adding roughly US$500 billion in market capitalization, and vaulting back over their US$135 initial public offering price. The surge bucked concerns about an impending wave of selling and gave investors optimism that future expirations won’t be as painful as feared.
Article content Story continues below This advertisement has not loaded yet, but your article continues below. Article content“We’ve gotten through the big hurdle, which was the unknown,” said Andrew Plum, managing partner and investment committee head at Loxahatchee Capital, which holds SpaceX shares. “It’s like the market discounts a negative event, maybe too much, as it’s waiting for that information to come to pass. And then it’s usually not as bad as what was discounted or as expected.”
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Article contentElon Musk’s space, satellite and artificial intelligence company has had a wild ride in the stock market since pricing its record US$86 billion IPO on June 11. The shares took off in their first days of trading before reversing direction and shedding more than US$1 trillion in market value through early August. The lockup expiration was supposed to be another hazard, but it turned out to be a blip.
Article content“If the stock was US$225, I would guess that it would have succumbed to the trend,” said Gene Munster, managing partner at Deepwater Asset Management, which holds SpaceX shares. He described his firm as in “brace mode” leading up to the expiration as they waited to see what transpired.
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The process for unlocking SpaceX shares is different than what usually happens after an IPO, where insiders are generally restricted from selling for 180 days. Considering the company’s size and its potential ability to shock the market, SpaceX’s management and bankers spread out the expirations with a nine-stage structure.
Article content Story continues below This advertisement has not loaded yet, but your article continues below. Article contentThis lockup was the biggest one, with 911.5 million shares coming available, more than were sold in the IPO. The next expiration is on Aug. 20, triggering the release of as many as 319 million shares, or seven per cent of the total amount of stock subject to selling restrictions. Similar seven per cent blocks will become available over the next few months before Musk’s 6.4 billion shares are unlocked in June 2027.
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An early bet on SpaceX led to a 30% gain for this college endowment - Advertisement 1Story continues belowThis advertisement has not loaded yet, but your article continues below.
Portfolio manager Tony Genua is back. Here's how he finds the next hot growth stock 
An early bet on SpaceX led to a 30% gain for this college endowment SpaceX shares plunged 14 per cent on the day before the expiration, but the culprit actually appears to be the company’s first earnings report, and specifically its higher-than-expected capital expenditures for artificial intelligence. However, the results also contained some good news, including a large beat in revenue and a better-than-expected loss per share. Those figures were likely another catalyst in the stock’s runup since then.
Article content“Once investors realized after that first day that it’s not going to go into free fall, then they realized they could kind of go back and reassess what happened in the quarter and realize that things are moving along,” Munster said.