SpaceX Rides a Rollercoaster: SPCX Plunges Over 16%, $20 Billion Debt Issuance Bearish News Triggers $150 Defense Line

TradingKey - SpaceX's debt issuance triggers market panic, while the competition for AI talent further exacerbates its decline, raising fears of a drop toward its IPO price.

On June 22, Eastern Time, SpaceX (SPCX) shares plummeted 16.43% to a low of $152.6, nearing its opening price of $150 on its debut trading day. Since its IPO, SpaceX has gone through six trading days, climbing continuously in the first three before embarking on a downward trend that has virtually wiped out all its gains.

During pre-market trading on June 22, SpaceX shares fell about 5% due to the debt issuance. It is reported that SpaceX is preparing its inaugural bond offering, aiming to raise at least $20 billion to repay temporary bridge loans. S&P, Moody's, and Fitch have assigned ratings of BBB, Baa1, and BBB+ respectively to SpaceX's debt—three notches above junk status but short of prime investment grade. SpaceX's move to issue debt so shortly after fundraising, coupled with its mediocre credit ratings, has triggered market concern and anxiety.

Furthermore, a broad sell-off in tech stocks further exacerbated SpaceX's decline. Google ( GOOG) reportedly lost two of its top core AI talents, sparking market concerns over the competitive moats of tech giants. Alphabet plunged over 5%, Amazon ( AMZN) shed over 4%, Microsoft ( MSFT) dropped over 3%, Meta ( META) slipped over 2%, while the Nasdaq Composite fell 1.32%.

Amid this bearish sentiment, positive news for SpaceX was selectively ignored. Not long ago, SpaceX signed a computing power lease agreement worth up to $6.3 billion with open-source AI developer Reflection. Starting July 1, Reflection will pay SpaceX $150 million per month to access computing power, a contract that runs through 2029.

With Google having its talent poached, SpaceX could face the same issue in the future. In fact, SpaceX's acquisition of Cursor may have been driven not just by its product, but also by talent acquisition. Following SpaceX's acquisition of xAI, the mass departure of the original xAI founding team left a void in AI talent. While SpaceX could potentially retain AI talent through higher salaries or other benefits, doing so would increase capital expenditures. In other words, the fallout from AI competition could ultimately drive up corporate costs and squeeze profit margins.

Currently, SpaceX faces multiple pressures. Its previous support level at $172 has been completely shattered, and the next support level lies at $150. In an optimistic scenario, if SpaceX can secure institutional validation for its long-term credit, the stock price may bottom out around $150. However, if it breaks below $150 on high volume, it could plunge further to test its IPO price of $135.

SpaceX stock chart, Source: TradingView