SpaceX Earnings Are Coming Aug. 4. Here's Why Aug. 6 Could Be Even More Important For Investors.
SpaceX will share its first financial update with investors since it went public on Aug 4. The update will provide important information for investors, but another event two days later could have an even bigger impact on the stock: SpaceX's first lockup period will expire.
Intelligence analysis by Llama
SpaceX's first financial update with investors since it went public will be on Aug 4. The update will provide important information for investors, but the expiration of SpaceX's first lockup period on Aug 6 could have an even bigger impact on the stock.
SpaceX is a company that makes rockets and other space-related things. It's going to tell investors how it's doing financially on August 4th. But on August 6th, some of the people who own SpaceX stock will be able to sell some of their shares. This could make the stock price go down because there will be more shares available to buy and sell.
Analysis
A $106B Test of Market Absorption
When SpaceX went public, it sold roughly 5% of its total shares. The shareholders who own the other 95% of the company are restricted from selling their shares in the open market until set lockup expiration dates. The first of those expirations comes on the second full trading day after its second-quarter earnings report. That will be Aug 6. Most restricted shareholders will be able to sell up to 20% of their shares on that date. If SpaceX stock trades at 30% above its IPO price for five of the 10 trading days preceding the earnings report, they'll be permitted to sell an additional 10% of shares. However, the stock is trading below its IPO price as of this writing, and has been for almost two weeks now.
The first lockup expiration will be a test of how well the market can absorb additional stock now that the IPO excitement has worn off. If early investors cash out the maximum amount allowed, that would amount to about $106 billion in selling at the stock's price as of this writing. Individual investors will have some help from passive index investors. The Nasdaq-100 and Russell 1000, among others, will increase their weightings of the stock in their indexes as the float increases. But that won't happen instantly; most indexes review weightings quarterly. So most of the selling will have to be absorbed by a market that hasn't been too excited about SpaceX stock since the end of June. The stock has fallen by more than 33% in July so far, indicating more sellers in the market than buyers. Add to that the pressure from the lockup expiration, and it could push the stock price even lower.
On the other hand, Wall Street has always known about the lockup expiration that's coming on Aug 6, as well as the seven additional expiration dates that will follow, after which most early investors will be free to sell all of their shares. That could mean that the expectations of that future selling pressure are already priced into the stock. If that's the case, investors could see the stock price climb even as early shareholders reduce their stakes. That would be a strong sign that there's still considerable demand for the stock, especially at a price well below where SpaceX IPOed.
Key points
- SpaceX's first financial update with investors since it went public will be on Aug 4.
- The expiration of SpaceX's first lockup period on Aug 6 could have a significant impact on the stock price.
- Early investors will be able to sell up to 20% of their shares on Aug 6.
- The stock has fallen by more than 33% in July so far, indicating more sellers in the market than buyers.
If the expectations of future selling pressure are already priced into the stock, investors could see the stock price climb even as early shareholders reduce their stakes. This would be a strong sign that there's still considerable demand for the stock, especially at a price well below where SpaceX IPOed.
The first lockup expiration will be a test of how well the market can absorb additional stock now that the IPO excitement has worn off. If early investors cash out the maximum amount allowed, that would amount to about $106 billion in selling at the stock's price as of this writing. This could push the stock price even lower.
