The Worst Is Still To Come For SpaceX
Reality is approaching, and it will hit hard.
At the time of writing, SpaceX has scrubbed and delayed Starship’s 13th launch, the company’s stock has reached an all-time low, and SpaceX is being sued for allowing its chatbot to generate tens of thousands of CSAM images and millions of unconsensual sexualised images. In return, xAI/SpaceX is suing one user from South Carolina for allegedly using the chatbot in this manner. Oh, and China landed a rocket booster for the first time, using a design that is arguably better than SpaceX’s. Needless to say, SpaceX hasn’t had the best time as of late. But it is about to get so much worse for them.
Let’s zoom in on that stock slide, because we all know that is what Musk cares about above anything else. Just over a month ago, SpaceX peaked at $225 a share; at the time of writing, it has slipped down past its $135 IPO price to just $115. That means in just 36 days, SpaceX lost 49% of its value, wiping out roughly $1.4 trillion in market cap (which is more than Tesla’s current worth) and, in the process, forcing every single IPO or open market SpaceX investor still holding their position into a loss.
That is monumentally awful. But it is somehow even worse than you think.
As I have covered before, SpaceX engineered its IPO heavily to send the price skyrocketing. One of the most concerning of these manipulations was how Musk got NASDAQ to fast track SpaceX’s inclusion into index funds. Normally, stocks have to go through a year of “seasoning” after an IPO to be included in these products, to protect index investors from volatility. But NASDAQ changed these rules for SpaceX, allowing it to be included in its index after just 15 days of trading on the 7th of July. There are no exact numbers being reported, but it has been estimated that this would have caused $4.3 billion in forced purchases of SpaceX stock as NASDAQ rebalanced 100 investors’ portfolios to include it.
The total value of stock in the market (or ‘float’) on July 7th was roughly $86 billion, meaning this $4.3 billion NASDAQ index purchase would have tried to buy roughly 5% of SpaceX’s float. That should have permanently bumped up the stock price, given that this is a huge influx of consistent demand. But it didn’t. In fact, this barely changed the stock price at all.
Why? Well, just before this inclusion, SpaceX’s stock’s volume (how much is being sold/bought) spiked. In other words, a significant portion of SpaceX IPO investors sold at the exact same time the NASDAQ index was buying. Now, investors knew about NASDAQ’s rule change well ahead of time. So this all just looks like stock flipping. A considerable number of SpaceX IPO investors bought in with the express purpose of making a quick buck by flipping the stock to the index funds.
This means that SpaceX’s peak valuation was falsely inflated. But it also makes this rapid downward spiral even worse. After all, SpaceX lost almost half its value while billions’ worth of stock was being bought up. This shows that investors aren’t buying SpaceX as a company but the grift that surrounds it. It paints SpaceX investors as more similar to memecoin shills than stock traders.
This isn’t exactly good news, considering what is about to come.
