A Lot More SpaceX Shares Are About to Come Onto the Market
Key Points
Sales of shares by employees and private investors could put downward pressure on the stock.
SpaceX stock currently trades below its IPO price.
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When Space Exploration Technologies (NASDAQ: SPCX), also known as SpaceX, went public on June 12, only about 4.9% of its 13.2 billion shares were put up for sale, an unusually small public float.
But that percentage is set to more than double in August as many owners of pre-IPO shares will be partially released from the standard lock-up agreements.
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This week, the space exploration, satellite, and artificial intelligence firm headed by Elon Musk announced that it will deliver its first earnings report as a public company on Aug. 4. As per the rules set out in the company's prospectus, two trading days later, pre-IPO shareholders will be able to sell some 911 million of their locked-up shares, bringing the float to about 12%. Even more shares will be released if the stock trades at 30% above its IPO price on five of the 10 trading days prior to the earnings release.
Image source: Getty Images.
Essentially, the 180-day lock-up agreement expires in tranches, with more shares set to be released in September, November, and December. Elon Musk and some other significant investors are subject to a one-year lock-up. Musk owns around 40% of SpaceX shares, though he controls more than 80% of the company's voting power through a dual-class share structure.
And as SpaceX employees begin to liquidate their holdings to diversify out of the company's stock -- a normal occurrence after companies go public -- that selling could put downward pressure on the share price.
So, should you pick up a few SpaceX shares?
Well, that's a tricky question. After an initial bump in the first few days after the IPO, when investors bid the stock above $225, it has since retreated and now trades at around $121 a share, well below the $135 IPO price. Such price movement in an IPO stock is not unusual, but given that SpaceX is not yet profitable, it may take investors a while to regain their initial enthusiasm.
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Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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