SpaceX's First Lockup Expired Last Week. Why Didn't the Stock Crash?
Key Points
The first major lockup for SpaceX expired last week.
The stock didn't end up crashing as many investors may have expected.
Insiders, however, may not have necessarily been rushing to sell their SpaceX holdings, for a variety of reasons.
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There was a lot of anticipation around Space Exploration Technologies Corp (NASDAQ: SPCX), the rocket company better known as SpaceX, and what would happen last week as lockups began expiring for this recently listed stock, which could have potentially resulted in a massive wave of shares being sold. Many investors were bracing for a sell-off.
So why didn't it happen?
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Why SpaceX stock didn't plummet after Aug. 6
Aug. 6 was the date of SpaceX's first lockup expiration, enabling 911.5 million of insider shares to be available for sale. There are a couple of things to consider here, however, that may explain why SpaceX's stock didn't simply fall over a cliff last week.
The first is that while 911.5 million more shares might be available for sale doesn't mean insiders are all going to unload them right away, or even anytime soon. Given the stock's free fall in recent weeks, many who may have wanted to sell the space stock may have been unwilling to do so, given the recent decline. SpaceX has, after all, already proven to be a volatile stock. While it has been crashing, it also has the potential to rise quickly in value, as it did in its early trading days. Insiders may be waiting for a better price. Others may be in it for the long haul and not in a rush to sell at all.
Secondly, many investors may have already been anticipating Aug. 6 as the day to buy the stock in anticipation of the lockup expiring. The stock was already in free fall in recent weeks, and many investors may have expected Aug. 6 to be the bottom given the added selling pressure of more shares becoming available. Thus, even if there were insiders selling that day, there may have been far more buyers. And indeed, trading volume topped 255 million on Aug. 6 -- the highest they've been since mid-June, shortly after SpaceX stock went public.
Does this mean SpaceX stock is destined to rally higher now?
SpaceX stock may not have crashed last week, but that doesn't mean it's out of the woods, and more insiders won't sell the stock in the future. If there's one thing the stock has shown since going public nearly two months ago, it's how volatile it can be.
Its valuation is based highly on speculation and future expectations rather than its financials, as the business remains deeply unprofitable. And any investor who wants to buy SpaceX stock today needs to consider the risks of doing so, as this is likely to remain a highly volatile investment for the foreseeable future.
Should you buy stock in Space Exploration Technologies right now?
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David Jagielski, CPA 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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