SpaceX’s Blockbuster Stock Market Debut Gives Way to Investor Caution

SpaceX made history when it became a publicly traded company, delivering the largest initial public offering (IPO) ever seen. Yet barely a month after its spectacular Wall Street debut, the excitement that sent its share price soaring has begun to give way to questions about whether the company can live up to its lofty valuation.

The aerospace company, led by billionaire Elon Musk, entered the stock market on 12 June with shares priced at $135 each. Investor demand immediately pushed the stock to $150 before it climbed as high as $176 during its first trading session and eventually closed at $160.95.

The momentum continued over the following week, with the stock reaching an intraday high of $225, briefly making SpaceX more valuable than technology giants Amazon and Microsoft.

AI Enthusiasm Fuels Record-Breaking Debut

Much of the early excitement surrounding the IPO was driven by investor expectations that SpaceX would become a major artificial intelligence player, analysts say.

“With Elon Musk, any company he touches gets people excited,” said Keith Snyder, an analyst at investment research firm CFRA. “But this was also the first time people felt like they were able to invest in something that was being marketed as an AI play.”

Willy Lee, an investor at Neosteller, echoed that view.

“Everyone saw SpaceX as an AI story,” he said.

Investor optimism was strengthened after SpaceX acquired Musk’s artificial intelligence startup xAI – now renamed SpaceXAI – and expanded into leasing data centre capacity to technology companies.

However, SpaceX’s core business remains the manufacture and launch of rockets and the operation of its Starlink satellite internet network.

That reality began to influence investor sentiment after Starlink announced price cuts in Memphis, Tennessee, amid controversy surrounding a major data centre project. The news contributed to an 8% drop in SpaceX shares.

Market Excitement Begins to Cool

As investors focused more closely on how the company currently generates revenue, SpaceX’s stock began to retreat.

The decline continued even as broader technology stocks experienced volatility.

When SpaceX joined the Nasdaq-100 index on 7 July, the benchmark index closed down 1.7%, but SpaceX fell an even steeper 4.4%. An earlier inclusion in the FTSE Russell index had provided only a modest boost.

By the end of its first month as a listed company, SpaceX shares were trading at around $145, roughly 18% below their first-day high and about 35% below their record peak.

The company declined to comment on the performance of its shares.

Retail Investors Feel the Pressure

The sharp pullback has left many individual investors nursing losses.

“If you bought around the first tick you’re definitely underwater,” Snyder said.

He compared the early trading activity to the speculative buying seen in so-called meme stocks.

“It started to look a lot like a meme stock,” Snyder said, referencing companies such as GameStop and Wendy’s, whose valuations were driven by retail investor enthusiasm rather than underlying business fundamentals.

Based on SpaceX’s current financial performance, Snyder believes the shares could fall further to around $115, which would still value the company at approximately $1.5 trillion.

Samuel Kerr, Head of Equity Capital Markets Analysis at Mergermarket, said the market’s volatility has affected different groups of investors in different ways.

“If you’re an IPO investor, you’re ok,” Kerr said, referring to investors who bought shares at the official listing price of $135 or insiders who held pre-IPO equity.

“If you bought in the first few days, you’re not very happy right now,” he added.

Musk Remains Bullish on SpaceX’s Future

Despite the market’s recent caution, Elon Musk has continued to project enormous confidence in SpaceX’s long-term prospects.

Following the IPO, which made him the world’s first trillionaire, Musk predicted that SpaceX would generate $1 trillion in annual revenue by 2030.

He has also demonstrated a willingness to use the company’s rapidly appreciating shares as an acquisition currency.

When SpaceX’s stock surged on 16 June, the company announced it would acquire Cursor, an artificial intelligence startup specialising in AI-powered coding tools, in an all-stock transaction valued at $60 billion.

Because the company’s share price had risen sharply at the time, the acquisition effectively allowed SpaceX to use its inflated stock value to finance the deal.

“It showed a level of market sophistication that almost no other issuer has,” Kerr said of the Cursor acquisition.

Since then, however, the company’s share price has steadily drifted lower.

Attention Turns to First Earnings Report

While recent trading has been volatile, some analysts remain optimistic.

Investment bank Morgan Stanley, one of the lead advisers on the IPO, recently initiated coverage of SpaceX with a target price of $300 per share – around 33% higher than the stock’s previous peak.

Financial disclosures made during the IPO showed that SpaceX generated $18 billion in revenue last year while remaining unprofitable.

That figure remains a long way from Musk’s projection of $1 trillion in annual revenue by the end of the decade.

Investor attention is now shifting to the company’s first public earnings report, which analysts expect in early August.

The results are likely to coincide with the end of the IPO lock-up period, allowing employees who received company shares as part of their compensation packages to begin selling them on the open market.

The combination of fresh financial disclosures and a potentially larger supply of shares could trigger another period of significant price swings.

“If SpaceX can do all the things it says it will do, yes, investors are sitting on the most valuable company ever,” Kerr said.

“But it’s got a lot of work to do to get there.”