Yahoo Finance
SpaceX (NASDAQ:SPCX) shares have slipped below their initial public offering price, raising concerns that the stock could face additional volatility as insider lockup restrictions begin to expire in the coming weeks.
The stock fell to an intraday low of $132.15 on Wednesday before recovering to close at $135.27.
Since reaching record highs shortly after its June 11 IPO, the shares have declined roughly 33%, although the company still commands a market capitalization of about $1.8 trillion.
Despite completing the largest IPO in US history, SpaceX floated less than 5% of its outstanding shares, creating a limited public float that helped drive its valuation to approximately $2.1 trillion following its Nasdaq debut.
That dynamic is set to change as lockup restrictions on employees, early investors and insiders begin to expire, allowing substantially more shares to enter the market.
"We think at this level, it's relatively safe to at least be involved from a trading perspective," said Jay Hatfield, CEO of Infrastructure Capital Advisors in New York.
"We won't overweight it because they do have the lockup coming." Even after the recent pullback, SpaceX continues to trade at around 49 times expected revenue, making it one of the most expensive large-cap stocks based on that valuation measure.
For comparison, Tesla, another company closely associated with Elon Musk, recently traded at approximately 15 times expected revenue.
Supporters of the stock argue that its premium valuation reflects the long-term potential of Starlink, its commercial and government launch operations, and Musk's ability to attract investor confidence, despite the company reporting a net loss of nearly $5 billion last year.
According to LSEG data, 27 of the 32 analysts covering the stock currently recommend buying, while four have neutral ratings and one recommends selling.
A Reuters review of 50 major US IPOs since 2010 found that companies whose shares traded below their IPO price within the first two months generally delivered weaker long-term performance than those that remained above their offering price.
The first lockup expiration will allow employees and selected early investors to sell approximately 911.5 million shares on the second trading day following SpaceX's first quarterly earnings release.
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