Space Exploration Technologies (SPCX +1.93%), also known as SpaceX, went public on June 12, and it has taken early investors on a roller-coaster ride. Depending on when you got in, you could be sitting on solid gains or a hefty loss.
Successful investing is a long-term endeavor, so it's important not to overreact to what happens over a week, month, or even a year. Ideally, you should plan to hold stocks you buy for at least five years. That said, SpaceX has become one of the largest public companies in the world, so now's a good time to see how it has done over its first few weeks on the market.
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An extremely volatile two weeks
The SpaceX IPO was priced at $135. For anyone who didn't get IPO shares, it opened at $150 on June 12. It trades at $154 as of June 24. But that modest gain is the result of a wild round trip.
SpaceX lived up to the hype over its first three trading days, peaking at about $226 on June 16, a 50% increase from its first-day open. It was even the world's fourth-largest company at one point, ahead of Amazon and Microsoft.
However, SpaceX gradually declined over the rest of the week, closing at $185 on Friday, June 19. SpaceX stock then plummeted on Monday, June 22, closing at $155. Despite some ups and downs, it has mostly been flat since then.
SpaceX's stock was up 50% at its peak, then it fell 32%. You rarely see that kind of volatility in a megacap stock, but there's a simple explanation.
Why has SpaceX been so volatile?
The biggest factor driving SpaceX's volatility is its tiny float. Only 4.2% of SpaceX shares are publicly traded after its IPO, while the remaining 95.8% are held by insiders who are in their lockup period and can't sell yet.
Publicly traded companies typically have much higher floats. Most stocks on the major indexes have floats of at least 80%. A small float magnifies price movements. Surges in interest shortly after the IPO can cause substantial price increases. Any negative news can stop the momentum and unleash a rapid drop instead.
NASDAQ: SPCX
Key Data Points
The news that seems to have driven SpaceX's recent decline is the June 22 announcement that it had raised $25 billion in debt through a bond offering. It's using the proceeds to pay off a $20 billion bridge loan for the acquisition of xAI, which is reasonable enough, but raising more money after it just made $75 billion from its IPO worried some investors.
SpaceX's float will gradually increase, as its lockup period has staggered selling windows. In each selling window, a percentage of insider shares unlocks and can be sold on the public market. The final selling window is 180 days after the IPO.
Investors should expect heightened volatility until the lockup period ends in December. Even after that, SpaceX will be a high-risk investment that goes through significant price swings, as space and AI, the company's core businesses, are both volatile industries.
While there's a lot to like about SpaceX, you may want to hold off on investing until the price comes down or the lockup period ends.
