SpaceX Shares End First Week of Trading Up 37% From IPO Price

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.

ALSO READ: Analysis: X Was Seen As Elon Musk's Ego Project. SpaceX Listing Reveals His Grand Plan

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.

ALSO READ: SpaceX Shares Fall for First Time Since Blockbuster Debut

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."