Short sellers pile on, holding paper profit of about US$8.7 billion since the debut
Short sellers have built bearish positions worth roughly US$25bn against SpaceX, betting against the newly public rocket maker after its shares fell below the US$135 price of last month's record initial public offering.
Traders have now sold short about 185m SpaceX shares, or close to 29 percent of the company's publicly tradable float, according to S3 Partners.
That position has ballooned from an estimated 40m shares, roughly 5 percent to 7 percent of the float, just three weeks earlier.
"We are seeing continuous demand from short sellers building speculative positions since the IPO," Matthew Unterman, head of research at S3, told CNBC.
A separate reading from Ortex Technologies put nearly 49 percent of the free float out on loan, most of which the firm attributes to short selling, and estimated the bears were sitting on about US$8.7bn in paper profit.
"SpaceX has been a rollercoaster for the short sellers, and it has ended up firmly in their favor," Ortex co-founder Peter Hillerberg said, adding that rather than take profits, the bears kept adding the whole way down.
Every one-dollar move in the shares is worth more than US$300m to the short side, Ortex estimates, a dynamic that could swing the stock hard in either direction.
The immediate catalyst came on Thursday, when SpaceX scrubbed the 13th test flight of its Starship rocket after an engine ignition failure triggered an automatic abort.
Reuters reported the setback wiped roughly US$100bn from the company's market value, with shares sliding about 6 percent to US$124.30.
The stock had already fallen about 20 percent over July and slipped below its IPO price for the first time on the Wednesday before the abort, well down from a post-IPO high of US$225.64.
Founder Elon Musk said on X that "some of the engines didn't start, triggering an automatic launch abort."
He later wrote that "to be confident of a good flight, 2 Raptors will be removed & replaced," with the next attempt targeted for early this week; SpaceX's website flagged Monday, July 20, as a possible launch date, as per Reuters.
Not every investor reads the slide as a warning.
"I can't wait to see how it responds to a successful flight," Chad Anderson, chief executive of Space Capital and a SpaceX backer since 2017, told Reuters by text about the reaction to a precautionary abort.
He called day-to-day price action "noise against the backdrop" and framed the sell-off as a long-term entry point.
The bearish positioning also comes ahead of a lockup schedule that could sharply increase the supply of tradable stock.
SpaceX's initial float represented only about 5 percent of its roughly 13bn shares outstanding, according to KeyBanc Capital Markets, which estimated the first major unlock, about 11 percent of shares, could arrive around the second-quarter earnings report.
Further tranches of roughly 4 percent each are slated to begin near Day 70 after the offering, KeyBanc said, while Musk's stake of about 42 percent stays locked until June 2027.
SpaceX raised US$85.7bn in June, including the underwriters' option, in what CNBC described as the largest IPO on record, pricing shares at US$135 and, by CNBC's account, making Musk the first trillionaire.
The company won fast-tracked entry to the Nasdaq-100 after a rule change shortened the eligibility window to 15 trading days, but the stock has fallen nearly 23 percent since that induction.
Much of SpaceX's growth story rests on Starship, which the company says is central to expanding Starlink and eventually launching AI-processing satellites, after nearly a decade in development and more than US$15bn spent.
Reuters noted that Musk's history of public fights with short sellers has long made bearish bets against his companies a risky proposition.
