SpaceX’s stock price breaks below the offering price for the first time; the company bond yield at 7.5% rivals junk bonds

Author: Yang Chen, Wall Street Insights

Just a month after listing, SpaceX’s share price has already fallen below its IPO offering price, with much of the early rally nearly fully unwound. SpaceX is facing the typical confidence test after an IPO, and the upcoming release of the lock-up period will further add downside pressure.

On Wednesday, SpaceX shares fell as much as 2.9% to $132.15, slipping below the $135 per share offering price of last month’s record $86B IPO. The stock ultimately closed at $136.08, slightly above the offering price.

The stock’s action has followed the violent volatility pattern common to new listings: shares surged nearly 50% over the first three trading days after listing, then gave back nearly one quarter of those gains over the next three trading days.

Beyond the share price, the more notable development is the newly issued $25B bond by SpaceX, due in 2056. Since it began trading on June 24, the price has been falling steadily, and the yield is now as high as 7.5%, comparable to junk bonds.

SLC Management co-head of investment management Dec Mullarkey said:

"Investors are increasingly aware that the SpaceX story, to a large extent, is about its xAI ambitions. As the market becomes more cautious about the costs and benefits of building large-scale infrastructure, SpaceX’s plans sound too far away."

Of the $75 billion IPO financing by SpaceX in June, about 20% went to retail investors—an unusually high proportion for a large-cap equity offering. When the stock price falls below the offering price, it not only punctures the listing narrative carefully crafted by the company and its underwriting banks, but also leaves some newly listed companies in a hard-to-reverse confidence crisis.

Rising sell-pressure as the lock-up period approaches release

The downside risks may not be fully exhausted yet. As SpaceX is required to release its first quarterly earnings report in the coming weeks, the share lock-up periods of the first batch of early investors will expire one after another. Once those investors begin trimming after the lock-up period is lifted, the stock will face heavier selling pressure.

The sensitivity of this timing lies in the fact that new IPO earnings disclosures often become a window for early investors to realize gains. Even though the share price has already fallen sharply from its peak, compared with early entrants, there are still sizable unrealized paper gains, and trimming incentives cannot be ignored.

Index inclusion may have driven inflows of passive capital

SpaceX’s early rally may have been driven in part by forced buying from passive index funds.

After Nasdaq amended its rules, it allows new listed, large-cap companies to be added to the Nasdaq 100 as quickly as 15 trading days after listing, substantially shortening the prior minimum requirement of three months. SpaceX was added to the index in July based on this, and about two weeks after its late-June IPO, it was also added to the Russell 1000.

According to a Bloomberg report, Bloomberg Intelligence analyst Rob Du Boff estimates that SpaceX’s inclusion in the Nasdaq 100 and related FTSE Russell indices would prompt index funds to buy at least $5.4 billion worth of stocks. This sizable passive buy-side demand can provide support for the share price in the early period after listing, but such technical demand is typically hard to sustain.

Wall Street remains bullish, price targets imply substantial upside room

Despite the share price coming under pressure, Wall Street as a whole remains optimistic about SpaceX.

As the quiet period for bank-affiliated analysts participating in the IPO ended, a batch of bullish reports rolled out. Among them, Raymond James issued the highest target price on the street at $800.

According to Bloomberg tracking, more than 80% of analysts rate SpaceX as equivalent to a "buy," with an average target price of about $238—implying roughly 78% upside from the current share price.