SpaceX, which made its founder Elon Musk the world’s first trillioniare, is all set to lose over $1 trillion in market capitalization from its record high. Shares of SpaceX, he aerospace and artificial intelligence company, fell sharply on Friday.After dropping as much as 6.9% in early US trading to $122.12 per share, the stock recovered some of its losses. At that level, the company’s market value stood at $1.61 trillion, down from its high of $2.64 trillion seen at the close of June 16, its third trading session, according to a Bloomberg report.The Elon Musk-led company, formally named Space Exploration Technologies Corp., had surged following what was billed as the largest initial public offering in history. However, the stock has since dropped sharply and is now trading below its IPO price of $135.
Why is SpaceX share price down?
Friday’s decline followed the company’s decision to abort the launch of its Starship rocket because of an engine-related problem, with SpaceX saying another attempt would be made within the next few days.Earlier this month, SpaceX was added to the Nasdaq-100 Index and also received a series of bullish analyst ratings. The stock currently carries an average 12-month price target of $235.34.The weakness in SpaceX shares has raised concerns about the broader momentum behind artificial intelligence-related IPOs. AI forms a central part of the company’s IPO narrative as it pursues plans to deploy data centres in space, targeting what it estimates to be a total addressable market worth $26.5 trillion.The record-breaking public offering also provided a major boost to Wall Street’s leading investment banks, which generated their highest revenue from advising on equity offerings in the second quarter since 2021.As per a recent Reuters report, short sellers betting against SpaceX have accumulated an estimated $8.7 billion in unrealised gains since the company’s initial public offering last month. The report quoted data from analytics firm Ortex Technologies, as the stock slipped below its IPO price.Investors taking short positions – who borrow shares, sell them and later seek to repurchase them at a lower price to book a profit – have continued to increase their bearish wagers as SpaceX shares retreated from their post-listing high of $225.64 toward the IPO price of $135.“SpaceX has been a rollercoaster for the short sellers, and it has ended up firmly in their favor,” Ortex co-founder Peter Hillerberg said. “Rather than take profits, the bears kept adding the whole way down.”According to Ortex, nearly 49% of SpaceX’s free float, or almost half of the shares available for trading, is currently on loan.“We believe most of that is short selling,” Hillerberg reportedly said.SpaceX’s high market valuation has made it an attractive target for investors who believe the stock is overpriced. At the same time, strong participation from retail and institutional investors, combined with CEO Elon Musk’s long history of publicly confronting short sellers, continues to make bearish bets on the company a high-risk strategy.(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)
