On the second day of going public, SpaceX rose nearly 20% again, with a valuation reaching $2.5 trillion

Written by: Ye Zhen

Source: Wall Street Insights

On the second day after its listing, SpaceX’s stock price continued the strong momentum from the first day, pushing its market capitalization past the $2.5 trillion mark and officially placing it among the top six publicly listed companies worldwide by market value. This unprecedented super IPO, together with its extremely low initial free float, is bringing a rare “chips game” to global capital markets.

On Monday, SpaceX shares closed at $192.46, soaring nearly 20%. This was more than 42% above the IPO issue price of $135, and the market value increased by $412 billion in a single day.

After the underwriters fully exercised the over-allotment option (the green shoe mechanism), the company raised a total of $86.2 billion. After deducting underwriting fees, the net proceeds were $85.7 billion. This strong showing in the market not only directly boosted confidence in the AI sector, which has been driving the market higher this year, but also set the tone for resetting valuations across tech giants.

Market frenzy has made founder Elon Musk the world’s first trillionaire, with net assets already more than three times those of the world’s second-richest person, Google co-founder Larry Page. The successful listing has greatly eased Wall Street’s concerns about the market’s ability to absorb mega IPOs, and it has paved the way for major AI rivals such as Anthropic and OpenAI to potentially go public within the year.

However, with a strong start and expectations of passive buying, market observers warn that the stock’s volatility could sharply intensify in the coming months. In this capital banquet precisely designed by Wall Street, investors need to pay close attention to two key timing milestones coming in July. This not only involves the collision between massive passive capital and a “chip vacuum” period, but may also pull in a larger M&A chess game behind Musk’s business empire.

Retail buying frenzy resonates with the macro backdrop

During the first two trading days after the listing, retail investors’ bullish enthusiasm was extremely high.

According to data from Vanda Research, the number of SpaceX shares bought by retail investors in the first two days was comparable to the total retail buying across the entire U.S. stock market last week. Max Gokhman, Senior Vice President of Franklin Templeton Investment Solutions, pointed out that a large number of investors who previously had no access to investment channels had accumulated off-exchange, and such a huge demand in the early stage is not surprising.

Besides the inflow of capital at the micro level, macro geopolitical and liquidity conditions also provided support for the stock price surge.

With the U.S. and Iran announcing an agreement to reopen the Strait of Hormuz, and market expectations that the Federal Reserve—under its new chair Kevin Warsh—may pursue moderately accommodative policy, both the S&P 500 and the Nasdaq 100 recorded significant gains. Angelo Kourkafas, Senior Global Investment Strategist at Edward Jones, said that the macro backdrop is becoming more favorable, and declining yields may encourage investors to continue extending outward along the risk curve.

July 7: Nasdaq inclusion collides with extremely low float

As the frenzy in the early days of trading gradually cools off, the market is about to face its first key timing event with high trading value: July 7.

Former Wall Street analyst Alexandra Mertz noted that the A class shares issued in this round by SpaceX account for only 4.3% of its total market capitalization, meaning the free float at the beginning of the listing is extremely scarce.

July 7 is the first trading day after the Independence Day holiday and the 15th trading day since the listing. The Nasdaq 100 index will officially include SpaceX. According to Bloomberg, Intropic, the index rebalancing forecast institution, estimates that because major indexes plan to quickly add this stock, the proportion of floating shares held by passive investors is expected to surge to around 30% after 15 trading days.

At that time, major index funds such as Vanguard CRSP and FTSE Russell will be required to passively build positions in the open market without any conditions, according to the free-float adjustment mechanism. Market expectations place the scale of this passive buying between $8 billion and $18 billion. Since early shareholders are still in the lock-up (selling restriction) period at that time, the free float will fall to its lowest point.

Analysts warn that the positive collision between passive capital building and the historically lowest float, combined with AI model predictions, could drive the stock price to see extreme upward moves during this period.

Late July: the real selling pressure from earnings unlock and the institutional bottom line

The second timing node that deserves close attention falls on the two business days after the second-quarter earnings conference call, which is expected to be held in late July. For a typical IPO, the lock-up period usually follows a simple fixed term, but SpaceX’s unlock schedule has been tightly tied to the Q2 earnings meeting.

Market rumors suggest that after the earnings call, there could be a large-scale unlock of as much as 30% of early insider shares. However, Alexandra Mertz clarified that about 50% of these early insider stakes belong to Musk himself, and as the founder he is subject to an absolute 366-day lock-up period. Therefore, the shares that would truly flow into the public market as “fresh” unlocks are only 10% to 15%.

More importantly, the willingness of early major shareholders to sell is extremely low.

Renowned investor Ron Baron has clearly stated that he will not sell and plans to add $1 billion in the open market. BlackRock has also publicly expressed an intention to buy between $5 billion and $10 billion. As Matt Kennedy, Senior Strategist at Renaissance Capital, said, the stock has been “priced to near perfection.” When the rocket booster of retail demand falls away, and the stock price begins to feel the gravity of selling after institutional investors and employees’ unlocks, marginal buyers will become extremely important.

Capital chess game: a $7 billion tax event and “equal merger” speculation

Behind the carefully arranged listing schedule, Wall Street is closely tracking Musk’s personal financial timeline.

Musk must exercise the stock options in his 2018 Tesla compensation plan before August 15 this year, which will trigger a massive personal tax event of up to $7 billion. Before this critical date, the higher the stock price of the assets in his name, the more favorable it is for him to settle using equity netting or pledge loans.

Market analysts have mapped out a “blonde girl script”: between the window created by SpaceX’s stock price hitting a peak driven by index buying on July 7 and the influx of fresh shares during the late-July earnings unlock period, SpaceX and Tesla could announce an “exchange of stock for stock” equal merger. Through this open-market arbitrage mechanism, Musk’s tax funding pressure could be perfectly eased.

Clues to this speculation also appear in SpaceX’s underwriting roster. This IPO is unusually introducing Charles Schwab, Morgan Stanley, and JPMorgan Chase as core underwriters. Market observers believe that giving these institutions—who previously cast opposing votes in Tesla’s compensation case—substantial IPO underwriting allocation might be a trade to secure their support in a potential merger vote at Tesla’s shareholder meeting in November.

In addition, the governance structure stated in SpaceX’s prospectus provides logical support for this potential merger.

SpaceX’s Class B shares come with 10x super voting rights, and all shareholder litigation must be resolved through private arbitration, creating a perfect “founder defense fortress.” Analysts believe that, under the legal structure in which Tesla is folded into SpaceX, this is ultimately a capital solution at the root level to protect Musk’s business empire from interference by aggressive investors and local courts.