Traders are increasingly betting against SpaceX just weeks after IPO
Shares of Elon Musk’s rockets and AI company have slipped below their listing price for the first time
Traders are raising their bets against SpaceX’s equity and debt just a month after Elon Musk’s rockets and AI company went public in the biggest initial public offering on record.
SpaceX’s shares this week slipped below their initial listing price of $135 for the first time, down 40 per cent from an intraday high of $225 in mid-June in the days after the billionaire’s conglomerate raised $86bn at a valuation of almost $2tn. On Friday, the stock fell more than 5 per cent to close at a fresh low of $123.99.
Short sellers betting against the shares have in the past month booked paper profits of about $4bn, according to S3 Partners data.
About 30 per cent of the roughly 640mn SpaceX shares available to trade have been borrowed to sell short, up 10 percentage points over the past 10 days, highlighting how traders are becoming increasingly sceptical of the company’s market prospects.
“Investor enthusiasm for SpaceX seems to have cooled,” said Dec Mullarkey, managing director of SLC Management. The company’s equities and bonds are suddenly “pricing in more risk”, he added.
SpaceX did not respond to a request for comment.
The sell-off has come against the backdrop of a broader downturn for richly valued, previously high-flying tech stocks at the centre of the AI investment boom. US semiconductor chips on Friday ended their worst week since last year’s “liberation day” market rout.
About 900mn further SpaceX shares could become available to trade as soon as next month when certain lock-up provisions for pre-IPO investors expire. Traders who doubt there is sufficient demand for the deluge of extra equity are cashing out now as a result, market participants say.
“With more shares coming to market in August, [SpaceX] could announce that they’ve conquered the moon and found gold inside it and there still wouldn’t be enough money out there to buy the stock,” said the chief investment officer of a small North American hedge fund. His firm made $20mn shorting SpaceX earlier in July, he said.
Investors are also selling out of the company’s freshly issued debt. SpaceX raised $25bn in a huge bond offering in late June shortly after receiving an investment-grade credit rating from major rating agencies.
Yields on the company’s bonds are now trading at levels closer to those of junk-rated borrowers. The yield on a 30-year SpaceX bond has risen to 7.4 per cent from 6.7 per cent when it was sold three weeks ago, dragging the price of those notes to about 91 per cent of face value over the same period.
In a further sign of investors’ waning confidence, a market for SpaceX credit default swaps — derivatives that pay out when a company defaults — sprang up in late June.
SpaceX CDS are now trading at 158 basis points, Bloomberg data shows, meaning it would cost about $158,000 a year for five years to insure against the default of $10mn of the company’s bonds, up from $110,000 at the end of June.