SpaceX sheds $1 trillion in market cap as short sellers target low float
SpaceX has erased over $1 trillion in market value since June as a failed Starship test flight and aggressive short-selling expose the risks of the rocket maker's heavily restricted public float.
SpaceX shares fell below their $135 initial public offering price on July 15, capping a brutal month for Elon Musk’s rocket and artificial intelligence company. The stock dropped to $125 by Friday afternoon, representing a 43% decline from its record high of $225. In total, the firm has erased just over $1 trillion in market capitalization since peaking at $2.7 trillion on June 16.
The latest downward pressure followed the July 16 scrubbing of the 13th test flight for the company's 400-foot-tall Starship rocket. SpaceX aborted the launch due to an engine ignition failure, disrupting a program central to Musk's strategy to drastically reduce space travel costs. "Next launch attempt hopefully in a few days," Musk wrote on X, adding that "early next week" is the next available window. The stock fell 6% during Friday morning trading alone.
This technical setback has emboldened short-sellers who are aggressively targeting the company. Traders have taken short positions on roughly one-third of the company's publicly available shares. This heavy short interest represents a massive wager by the market that the valuation has further room to fall following its brief stint as the fourth-largest publicly traded company, having temporarily surpassed Amazon and Microsoft.
The primary driver of this extreme volatility is the structural scarcity of tradeable shares. SpaceX launched its record-setting IPO just last month, but fewer than 5% of its equity is currently available for public trading. The remaining 95% is subject to staggered lock-up agreements outlined in Securities and Exchange Commission filings, which strictly bar early investors and employees from selling their holdings.
This severe illiquidity initially fueled the company's meteoric rise, but it now acts as a double-edged sword that amplifies sell-offs when sentiment shifts. For investors, the current trajectory underscores the risks of trading a heavily hyped asset with a tightly constrained float. Furthermore, as those lock-up periods gradually expire, the market will eventually have to absorb a vast influx of newly available shares, posing a lingering structural risk to the stock's stabilization.
