SpaceX stock briefly dropped below $150 on Tuesday, falling to around $149 before recovering later in the day. The decline was significant because $150 was the price at which the stock first started trading when it made its market debut on June 12.
The stock later bounced back and was trading in the mid-$150 range by early afternoon. However, the temporary drop below $150 showed that investors have become increasingly cautious after the stock’s strong rally following its debut.
Early gains have now been erased
The fall below $150 meant SpaceX had wiped out all the gains it made since going public. Even after recovering, the stock remained far below its recent highs. Elon Musk‘s SpaceX has now lost about $600 billion in market value from its peak, and its valuation briefly slipped below the $2 trillion mark.
Biggest one-day drop adds to pressure
The latest decline came a day after SpaceX suffered its worst trading session since listing. On Monday, the stock plunged more than 16%, increasing concerns among investors. The sharp fall has also put pressure on major shareholders and market makers, who may try to support the stock as it approaches key price levels.
Lock-up expirations are worrying investors
Another reason behind the selling pressure is the upcoming release of additional shares into the market. According to 22V Research strategist Jeff Jacobson who spoke to Yahoo Finance, said around 20% of insider-held shares could become available for trading after SpaceX reports earnings in early to mid-August.
There is also a separate 10% share unlock if the stock trades 30% above its IPO price. Additional 7% share unlocks are expected around August 21 and September 10. Analysts say these events could increase the supply of shares and add to volatility in the coming months.
Space stocks are also feeling the impact
SpaceX’s weak performance has affected other space-related companies as well. Data from Bespoke Investment Group showed that a basket of space stocks had gained an average of 99% this year before SpaceX priced its IPO at $135 on June 11. Since then, those same stocks have fallen an average of 17%.
Concerns grow over valuation and business fundamentals
The recent volatility has also renewed questions about whether SpaceX’s valuation is justified. The company has promoted ambitious plans involving AI and space-based data centers, but critics argue that those projects remain largely unproven. Investors are also watching the company’s cash burn and future funding needs. The sell-off comes as technology stocks face pressure from growing concerns about a possible AI bubble. Chipmakers such as AMD and Nvidia also fell on Tuesday.
Investors are looking for proof
Some analysts believe the stock could become less volatile once more shares enter the market and trading stabilizes. However, many say investors will eventually need to see stronger business results to justify the excitement around the company.
Investors are “trading the story, they’re trading the action, they’re trading the excitement, they’re trading Elon Musk, but at some point the rubber meets the road in terms of the fundamentals having to match up with that excitement,” One Point BFG Wealth Partners chief investment officer Peter Boockvar told CNBC last week.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.