SpaceX Just Fell Below a Critical Level. Here's Why 10% of Early Release Eligible Shares Could Remain Locked Up for Longer

Space Exploration Technologies (NASDAQ: SPCX) hasn't even spent two weeks on public markets. And already, it has proven to be a highly volatile stock -- briefly surpassing Microsoft and Amazon in market cap before falling 32% from its all-time high at the time of this writing.

SpaceX is now up just 15% from its initial public offering (IPO) price of $135. Here's how the sell-off could affect the number of shares available and whether SpaceX is a good growth stock to buy now.

Image source: Getty Images.

SpaceX is dipping its toes into public markets

SpaceX's float, which is the number of shares available for public trading, makes up roughly 5% of its outstanding shares. The vast majority of SpaceX stock is still held by insiders through restricted stock units and Early Release Eligible Shares. While insiders like Elon Musk have agreed not to sell their shares until after a 366-day lockup period, SpaceX has a tiered approach for allowing the sale of Early Release Eligible Shares held by employees and pre-IPO institutional investors.

SpaceX has been a private company for over two decades, and throughout its history, it has sold stock in several funding rounds. For now, those shares are locked up. And the fear is that once these early investors can sell at a price several times what they paid, SpaceX will come under intense selling pressure.

The first wave of unlocking Early Release Eligible Shares will come on or after the second full trading day following SpaceX's earnings release for the quarter ended June 30, 2026, when 20% of Early Release Eligible Shares may be sold. Even if a small portion of these shares is sold, it could drastically increase SpaceX's float.

SpaceX specifies in its Form S-1 filing with the Securities and Exchange Commission that an additional 10% of Early Release Eligible Shares may be sold on or after the second full trading day following its upcoming earnings report if SpaceX's stock price is at least 30% higher than its IPO price -- meaning $175.50 per share -- for at least 5 of the 10 trading days leading up to and including the earnings release date. SpaceX was well above that level a few sessions ago, but Monday's sell-off has pushed it below that critical threshold.

Gradually unlocking Early Release Eligible Shares

Even if SpaceX remains below $175.50 per share, its float could still significantly increase in the coming months.

An additional 7% of Early Release Eligible Shares can be sold 70, 90, 105, 120, and 135 days after the IPO, another 28% of shares in the second full trading day after the earnings release for the three months ended Sept. 30, 2026, and then all Early Release Eligible Shares may be sold 180 days after the IPO.

*If SpaceX is above $175.50 per share for five of the 10 trading days leading up to and including the day of its earnings release for the quarter ended June 30, 2026. Date source: Securities and Exchange Commission.

The key takeaway is that, regardless of SpaceX's price, its float could significantly increase in August and September. However, even when 100% of Early Release Eligible Shares can be sold on Dec. 9, there's a chance that insiders could still hold more SpaceX shares than the public if insiders decide not to sell.

SpaceX's impact on ETFs

SpaceX may have gone public on June 12, but investors have only caught a glimpse of the real demand for the stock, given that so much of its supply is still locked up. This summer marks the true test for SpaceX. With more shares hitting public markets, it remains to be seen whether selling pressure will outweigh buying demand. Whereas in the first few days after SpaceX went public, demand outweighed supply.

What's more, we have yet to see the full extent of SpaceX's impact on exchange-traded funds (ETFs) -- which could unlock a ton of demand. While SpaceX will have to wait until at least June 2027 to be added to the S&P 500 (SNPINDEX: ^GSPC), it could receive fast-track entry into the Nasdaq-100 in July. The Nasdaq-100 is the 100 largest non-financial stocks listed on the Nasdaq.

SpaceX's weight in the Nasdaq-100 will be based on a multiple of its float rather than its market cap. But even with a lower weighting than its value, SpaceX's addition to the Nasdaq-100 would prompt ETFs whose benchmarks are the Nasdaq-100 and growth-focused ETFs to automatically begin buying the stock. SpaceX could also become a top holding in ETFs that track the stock market sector it is added to.

With market dynamics driving SpaceX's price action rather than its underlying investment thesis, long-term investors may want to wait until public markets digest SpaceX before buying now, even after its latest sell-off.

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool has a disclosure policy.