SpaceX gained for a fourth straight day, cementing the company’s place among the world’s most valuable stocks after it surpassed Amazon.com Inc.
Shares of Elon Musk’s rocket and AI firm rose as much as 6% in early trading Wednesday, extending their rally since going public to 58%. The company formally known as Space Exploration Technologies Corp. became the fifth-largest stock in the world on Tuesday after overtaking Amazon and briefly topping Microsoft Corp.
The continued rally signals that there’s still demand for the stock after its record initial public offering. That’s helped ease some concerns that the market would have trouble absorbing large IPOs, especially with potential public offerings from artificial intelligence competitors Anthropic PBC and OpenAI expected by year’s end. Both would likely be in the $1 trillion valuation range.
SpaceX stock’s run is “really not at all unexpected, especially with the fact that they had 30% of the issue available for retail investors,” said Brian Mulberry, chief market strategist at Zacks Investment Management.
SpaceX has been the most-bought stock by retail investors each day since its IPO, matching the combined buying of Nvidia Corp., Alphabet Inc., Amazon, Meta Platforms Inc., and top exchange traded funds tracking the Nasdaq 100 and S&P 500 indexes, according to data from Vanda Research. Over the same period, Tesla Inc. has seen roughly $61 million in net selling, the data show.
“Perhaps we’re seeing a rotation from one Elon-linked trade into another, with SpaceX increasingly viewed as the cleaner AI & tech exposure,” Vanda wrote in a note.
If SpaceX’s gain from its IPO price holds through its first five trading days, it will have easily beat both the median and average one-week returns of 30 major US tech IPOs in the past 15 years, according to Truist Advisory Services. The data also showed that while 57% of those IPOs produced positive returns after one week, one month and three months relative to their first-day close, only 43% were positive over longer six and 12 months periods.
The rally comes as investors look ahead to key events for the macroeconomic and geopolitical backdrop. Wednesday marks the Federal Reserve’s first rate decision under new chairman Kevin Warsh, spurring extra focus on communication style in the press conference. In addition, the US and Iran are set to formally sign an interim peace deal on Friday.
Some of the volatile intraday trading seen in shares of SpaceX can be attributed to low float, which might also be giving its stock price a boost. There are a relatively small portion of SpaceX shares available to trade, with only about 4.2% of total stock available on day one. As lockups keeping insiders from selling expire in the coming months, it could add downside pressure to shares.
Tuesday also marked the start of trading for SpaceX options contracts on some exchanges, an event that could stoke even more volatility in the stock. More than 1.7 million lots of options traded hands Tuesday.
While the majority of the options flow was in calls, instruments used to bet on a stock going up when they are bought, the flow became more balanced as the day went on. By the close on June 16, 44% of the options traded were puts, which can be used as insurance against a stock falling when purchased, in a sign that some investors are pessimistic about the Musk-led rocket maker’s valuation.
Investor Michael Burry, made famous by The Big Short, wrote in a Tuesday Substack post that so far, put options on SpaceX — a bearish bet — are too expensive, so he hasn’t bought any at the moment.
There’s also the possibility for index inclusion in the coming weeks. Nasdaq Inc. changed its rules to allow faster entry to shares of huge companies like SpaceX, which would force funds that track indexes such as the Nasdaq 100 to buy the stock. S&P Dow Jones Indices decided not to change its rules to allow new IPOs faster entry, meaning SpaceX won’t be immediately included in the S&P 500.
Forced buying would support the stock price. In the interim, however, some investors may be content to stay on the sidelines of SpaceX knowing that they’ll hold a passive investment in shares once it’s added to indexes.
“It could play into the fact that some investors are saying, well, I’m not going to panic because if you’re able to then go ahead and just track that index with an investable instrument, you’re getting exposure,” said Shelby McFaddin, a portfolio manager with Motley Fool Asset Management.
–With assistance from Subrat Patnaik, Bernard Goyder and Anthony Hughes.
Reinicke writes for Bloomberg
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