SpaceX Faces Epic Stock Unlocking: $116 Billion Worth of Shares to Enter Circulation on August 6

Approximately 911.5 million shares held by insiders of SpaceX will be unlocked on August 6, corresponding to a market value of about $116 billion.

Written by: Yang Chen, Wall Street Insights

The first unlocking after the largest IPO in history is about to take place, and the market is assessing its potential impact on stock prices.

According to SpaceX's prospectus, up to approximately 911.5 million shares held by insiders will be unlocked on August 6, involving a market value of about $116 billion, just two days after the company releases its quarterly earnings. By the end of the year, the total number of tradable shares will surge from the current approximately 639 million to 5.33 billion.

Faced with this massive unlocking scale, SpaceX's stock price is under significant pressure. Since the closing high on June 16, the stock price has fallen by 37%, erasing over $425 billion in market value. As of Tuesday's press time, the stock rose 3.8% during the day, potentially ending a seven-day losing streak.

According to data from S3 Partners, about 30% of the tradable shares are currently shorted, with short sellers making approximately $7 billion in profits.

What makes this unlocking unique is that SpaceX has not followed the usual practice of a uniform unlocking after 180 days post-IPO, but has designed a phased release arrangement to expand the float while minimizing drastic impacts on market supply and demand.

Phased Unlocking: An Unusual Structural Arrangement

Compared to traditional IPO unlockings, SpaceX's phased and staggered release mechanism is rare in the market. The prospectus shows that the over 900 million shares unlocked on August 6 are just the first batch; in the following months, the unlocking scale will continue to expand, and by early December, the total number of tradable shares in the market will leap to 5.33 billion, more than seven times the current level.

It is noteworthy that there is a conditional trigger mechanism after August 6: if SpaceX's stock price reaches $175.50 for at least five of the ten trading days before the earnings announcement, an additional maximum of 455.8 million shares will be allowed to trade immediately after the earnings release.

Based on Monday's closing price of $119.85, reaching this threshold would require the stock price to rise over 46% from its current level, which the market generally considers to be a high difficulty.

Elon Musk holds approximately 7.8 billion shares, accounting for about 60% of the total equity. The prospectus indicates that the lock-up period for his shares extends to over a year after the company's June listing, meaning it will not become a source of unlocking pressure in the short term.

Early Investors Face Lucrative Exit Opportunities

Despite the recent significant pullback in stock prices, early shareholders still possess considerable floating profits compared to the valuation levels before the IPO. SpaceX was valued at about $400 billion in a round of private financing a year ago.

Earlier this year, SpaceX completed the acquisition of xAI, which at the time assigned a total valuation of up to $1 trillion to SpaceX, with xAI valued at $250 billion, according to Bloomberg. This deal has allowed many investors to pocket billions of dollars, with the value of their equity in the public company reaching several times their initial investment.

The phased unlocking arrangement means that early private market investors and insiders will gradually welcome exit windows in the coming months and can choose to cash out in batches at different price levels.

Short Sellers Pressuring, IPO Market Sentiment Deteriorating

The expectations of unlocking combined with valuation disputes have triggered a massive entry of short sellers. According to S3 Partners data, about 30% of the tradable shares are currently shorted, with short sellers making approximately $7 billion in profits.

In the past 12 trading days, SpaceX's stock price has fallen for 10 days, with factors triggering this besides unlocking expectations including the Starship rocket halting launches due to engine failures, and the overall market rotating funds away from AI concept stocks.

The volatility of SpaceX has had spillover effects on the overall new stock market.

According to Bloomberg data, the weighted average return of newly listed companies this year has fallen to -4.4%. Even excluding SpaceX and SK Hynix, the overall return rate of new stocks this year is only 5.3%, far below the S&P 500 index's increase of 9.4% during the same period.

How to balance the release of liquidity with stabilizing stock prices will be the core challenge facing SpaceX and its underwriting team in the coming months.

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