SpaceX faces epic stock unlocking: $116 billion in shares to enter circulation on August 6

The largest IPO lock-up expiration in history is about to take place, and the market is assessing its potential impact on the stock price.

According to the SpaceX prospectus, up to approximately 911.5 million shares held by insiders will be unlocked on August 6, with a market value of about $116 billion. This event comes just two days after the company’s first quarterly earnings release. By the end of the year, the total number of outstanding shares will surge from the current 639 million to 5.33 billion.

In the face of such a massive unlock, SpaceX’s stock price is under significant pressure. Since the closing peak on June 16, the share price has dropped by 37%, wiping out more than $425 billion in market value. As of press time on Tuesday, the intraday price rose by 3.8%, potentially ending a seven-day losing streak.

According to S3 Partners data, roughly 30% of tradable shares are currently being shorted, with short sellers having paper profits of about $7 billion.

The uniqueness of this lock-up expiration lies in the fact that, unlike the usual 180-day unified unlocking period after an IPO, SpaceX designed a phased release arrangement, aiming to expand liquidity while minimizing market supply-demand shocks.

Compared with traditional IPO unlocking processes, SpaceX is employing a rare strategy of batch and staggered releases. The prospectus shows that the over 900 million shares to be unlocked on August 6 are just the first batch; over the following months, the scale of unlocked shares will continue to expand, and by early December, the total market tradable shares will soar to 5.33 billion—more than seven times the current level.

It is worth noting that there is also a conditional trigger after August 6: If SpaceX’s stock price reaches at least $175.50 for at least five out of ten trading days before the earnings report, up to another 455.8 million shares will be eligible for trading immediately after the results are released.

Based on Monday’s closing price of $119.85, surpassing this threshold would require the stock price to rise by more than 46% from the current level, which most market participants consider a high bar.

Elon Musk holds about 7.8 billion shares, accounting for roughly 60% of the total share capital. The prospectus notes that his lock-up period will extend more than a year beyond the June IPO, meaning his holdings will not contribute pressure in the short term.

Despite the recent significant price correction, early shareholders still have considerable paper profits relative to pre-IPO valuation levels. About a year ago, SpaceX was valued at roughly $400 billion in a private fundraising round.

Earlier this year, SpaceX completed the acquisition of xAI, which at the time valued SpaceX at as much as $1 trillion and xAI at $250 billion, according to Bloomberg. This deal generated billions in gains for numerous investors, with their shareholdings in the public company now worth several times their initial investment.

The phased unlocking arrangement means that early private market investors and insiders will have successive exit windows in the coming months, allowing them to cash out in batches at different price points.

The combination of unlocking expectations and valuation disputes has attracted a significant influx of short sellers. According to S3 Partners data, currently about 30% of outstanding shares are shorted, with paper profits for shorts around $7 billion.

In the past 12 trading days, SpaceX has closed lower on 10 occasions, due to not only unlock concerns but also the Starship rocket’s aborted launch from engine failure and a market-wide rotation out of AI-themed stocks.

SpaceX’s sharp volatility has spilled over to the broader IPO market.

According to Bloomberg data, the weighted average return for newly listed companies this year has fallen to -4.4%. Even excluding SpaceX and SK Hynix, the overall IPO return this year is just 5.3%, well below the S&P 500’s 9.4% increase over the same period.

How to balance liquidity release with price stability will be the core challenge for SpaceX and its underwriters in the coming months.