SpaceX slips below IPO price as lock-up concerns weigh on shares

The dip in SpaceX's shares below its blockbuster IPO price of $135 a share is an ominous sign ‌for Elon Musk's internet and rocket company as it faces more potential volatility in early August, when the number of shares available for trading on the Nasdaq stands to increase significantly.

The company's stock on Wednesday dipped as low as $132.15 before closing at $135.27. It has now tumbled 33% from its record close in the immediate days after the public sale ​raised a record $75 billion on June 11. Even after that steep decline, it remains one of Wall Street's most valuable companies with ​a market capitalization of roughly $1.8 trillion.

While SpaceX's IPO was the largest in U.S. history, it made less than 5% ⁠of its shares available for stock market trading, making investors fight for a scarce number of shares that helped value the company at $2.1 trillion ​after its first day on the Nasdaq. So-called "lockup" restrictions on insiders will lift in coming months, potentially flooding the market with additional shares.

"We think at ​this level, it's relatively safe to at least be involved from a trading perspective," said Jay Hatfield, CEO of Infrastructure Capital Advisors in New York. "We won't overweight it because they do have the lockup coming."

The stock is valued at 49 times expected revenue following the selloff, still one of Wall Street's priciest stocks by that measure. ​By comparison, Tesla -- another Musk-backed investor favorite -- recently traded at a revenue multiple of 15.

Bullish analysts and investors say SpaceX warrants a high premium ​because of its profitable Starlink internet service, its government rocket launch business, and Musk's track record commanding investor loyalty, even though it reported a net loss of ‌nearly $5 billion ⁠last year.

Of the 32 analysts with ratings on the stock, 27 recommend buying, while just one recommends selling and four are neutral, according to LSEG data.

A Reuters analysis of 50 high-profile U.S. IPOs since 2010 showed that companies whose shares fell below their IPO price in the first two months after their market debuts have gone on to underperform those that didn't, even though most still posted gains.

Twenty-one of the 50 companies fell below their IPO ​price in their first two months; ​those stocks have a median ⁠increase of 61% since their debuts, compared with a median gain of 112% for the remaining 29.

-Reuters