SpaceX Shares End First Week of Trading Up 37% From IPO Price
While shares are seeing selling pressure, the stock is still on track to beat out the average first-week performance of 30 major US tech IPOs from the past 15 years, according to Truist Advisory Services.
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Shares of Elon Musk's rocket, satellite and artificial intelligence company fell 3.6% Thursday, bringing a two-day decline to 8.3%.
(Photo: Bloomberg News)
SpaceX stock ended higher in its first week of trading, even though its rough ride showed the largest-ever IPO was not immune to the type of share-price volatility that tends to rock big companies after they go public.
Shares of Elon Musk's rocket, satellite and artificial intelligence company fell 3.6% Thursday, bringing a two-day decline to 8.3%. Still, the company ended its first week of trading as a public company 37% above the $135 price of its record initial public offering. The company's total market capitalization at close was $2.4 trillion, making it the sixth-largest company in the world.
"After a run like this, a down day or two looks a lot more like exhaustion than anything fundamental. You had a near vertical move off the IPO, very little float, and at some point buyers simply need to catch their breath," Dave Mazza, chief executive officer of Roundhill Financial, said. "The level I care about is the $135 IPO price, and as long as we are sitting well above it, I read this as the stock digesting a huge week rather than anything that should concern people."
Retail trading is playing a part in the choppy moves after the group was allocated about 20% of total stock on offer at the IPO. Retail investors were big net buyers of SpaceX in its first few days of trading, putting more into the company's stock than other favorites such as Nvidia Corp. The group stepped back Wednesday, with net flows flat for most of the day and ending with a small $2.3 million net buy at market close, according to data from Vanda Research.
On Thursday, the cohort had net sales of $3.5 million in the first 10 minutes of the trading session before flows stabilized and moved back into positive territory.
Volatility is likely to continue as investors weigh lofty expectations for future revenue growth without a clear path to achieving them, according to Michael Monaghan, partner and portfolio manager at Founder Funds in Dallas, which holds shares of SpaceX.
"We got very comfortable owning this stock because we could see $200 billion of revenue in 2030," he said, noting even higher estimates elsewhere. "But literally and figuratively you need a rocket to go get those revenues."
Arete Research's Andrew Beale initiated coverage on the stock Thursday with a buy rating and $401 price target, implying it will more than double from where it currently trades.
"We think fundamentals and SpaceX's long-term growth potential will drive investor interest," Beale said. While he forecasts that the firm will top $200 billion in revenue by 2030, he cautioned that the path there won't necessarily be entirely smooth sailing.
"Space is hard and timelines can slip with launch anomalies, technical challenges, environmental concerns and any number of other factors, so all estimates should be treated with a wide degree of caution," he added.
Meanwhile, bankers for SpaceX are preparing to hold calls with investors for a potential bond offering expected to be at least $20 billion, Bloomberg News reported, citing people with knowledge of the matter.
Despite a rocky couple sessions of trading, shares may be about to get some support from index inclusions in the weeks ahead. SpaceX will be eligible to be added to the Nasdaq 100 index after 15 days of trading thanks to Nasdaq Inc.'s rule change to allow faster entry for megacap IPOs. Of course, if SpaceX is added to the Nasdaq 100, it will likely command a small weighting in the gauge at first. It will also soon be eligible for inclusion in FTSE Russell and MSCI Inc. gauges.
As a result, about 30% of SpaceX's free float is set to be owned by passive investors just two weeks after the IPO, according to Intropic, a provider of index-rebalancing forecasts. That demand, combined with its low float - as lockups prevent insiders from selling shares for months - could put upward pressure on SpaceX shares.
"You're already seeing ETFs and other things popping up, trying to capture some form of SpaceX already," said Ann Miletti, head of equity investments at Allspring Global Investments. "I don't know that it will be that dramatic of a shift. Obviously investors who are very focused on benchmarks, and if you're involved at all in growth or technology, you're looking at 'how do I position myself if this does enter any benchmarks?' So that's kind of the main thing that tends to drive a little bit of volume."
History shows trading can be very turbulent for megacap IPOs: The average maximum drawdown from the close on day one is 55% within the stock's first year, according to a Truist Wealth analysis. But with the weekly gain at Thursday's close, SpaceX stock beat out the average first-week performance of 30 major US tech IPOs from the past 15 years, according to Truist Advisory Services.
"There is still a lot of noise in the trading," said Dec Mullarkey, managing director at SLC Management. "There was always going to be some level of tactical buying in this name. And that usually takes a few weeks to get that out of the system. So we are still early in that price discovery on what would be a reasonable trading range for the stock."
Arete Research's Andrew Beale initiated coverage on the stock Thursday with a buy rating and $401 price target, implying it will more than double from where it currently trades.
"We think fundamentals and SpaceX's long-term growth potential will drive investor interest," Beale said. While he forecasts that the firm will top $200 billion in revenue by 2030, he cautioned that the path there won't necessarily be entirely smooth sailing.
"Space is hard and timelines can slip with launch anomalies, technical challenges, environmental concerns and any number of other factors, so all estimates should be treated with a wide degree of caution," he added.
Meanwhile, bankers for SpaceX are preparing to hold calls with investors for a potential bond offering expected to be at least $20 billion, Bloomberg News reported, citing people with knowledge of the matter.
Despite a rocky couple of sessions of trading, shares may be about to get some support from index inclusions in the weeks ahead. SpaceX will be eligible to be added to the Nasdaq 100 index after 15 days of trading thanks to Nasdaq Inc.'s rules change to allow faster entry for megacap IPOs. Of course, if SpaceX is added to the Nasdaq 100, it will likely command a small weighting in the gauge at first. It will also soon be eligible for inclusion in FTSE Russell and MSCI Inc. gauges.
As a result, about 30% of SpaceX's free float is set to be owned by passive investors just two weeks after the IPO, according to Intropic, a provider of index-rebalancing forecasts. That demand, combined with its low float - as lockups prevent insiders from selling shares for months - could put upward pressure on SpaceX shares.
"You're already seeing ETFs and other things popping up, trying to capture some form of SpaceX already," said Ann Miletti, head of equity investments at Allspring Global Investments. "I don't know that it will be that dramatic of a shift. Obviously investors who are very focused on benchmarks, and if you're involved at all in growth or technology, you're looking at 'how do I position myself if this does enter any benchmarks?' So that's kind of the main thing that tends to drive a little bit of volume."
While shares are seeing selling pressure, the stock is still on track to beat out the average first-week performance of 30 major US tech IPOs from the past 15 years, according to Truist Advisory Services.
"There is still a lot of noise in the trading," said Dec Mullarkey, managing director at SLC Management. "There was always going to be some level of tactical buying in this name. And that usually takes a few weeks to get that out of the system. So we are still early in that price discovery on what would be a reasonable trading range for the stock."
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)