Short sellers load up against SpaceX as stock retreats back to IPO price

Short interest in SpaceX has surged in recent weeks, with about 29% of the company’s publicly tradable shares now sold short. According to data from S3 Partners, the value of these bearish bets totals around $25 billion.

This surge in short selling is not surprising given SpaceX’s struggles to gain traction since its initial public offering (IPO) in April. Despite an initially strong debut, the company’s stock has fallen about 20% in July and briefly dipped below its IPO price earlier this week.

One key factor driving the short-selling frenzy is the looming lockup schedule. As KeyBanc Capital Markets notes, only a small fraction of SpaceX’s roughly 13 billion outstanding shares were made available for trading at the time of its IPO. The majority of these shares remain locked up until June 2027, with Elon Musk holding an estimated 42% stake in the company.

The upcoming unlocks tied to performance milestones and quarterly earnings reports could soon flood the market with additional supply, sending warning signals to investors who have been betting big on SpaceX’s future prospects. “We are seeing continuous demand from short sellers building speculative positions since the IPO,” Matthew Unterman, head of research at S3 Partners, told CNBC.

The sheer scale of these bets suggests that many investors are starting to doubt Musk’s ability to deliver on his ambitious space exploration plans. While the 13th Starship test flight scheduled for Thursday may provide a much-needed catalyst for sentiment toward the shares, it remains to be seen whether this will be enough to stem the tide of bearish bets.

SpaceX’s situation bears similarities to that of another high-profile tech IPO: Tesla, which also struggled to gain traction after its debut before eventually finding its footing. However, SpaceX faces unique challenges, including regulatory hurdles and a more competitive market. As investors continue to weigh their options, one thing is clear: the coming months promise to be a wild ride for SpaceX’s shareholders – and perhaps even more so for those who have bet against the company’s success.