Summary of Key Points
Just one month after its listing, SpaceX's stock price fell below its initial offering price of $135 for the first time during trading, and it continued to decline for four consecutive days, resulting in a market value reduction of approximately $860 billion (a third of its total value). This “test of confidence” not only hit retail investors who bought in on the hype but also put AI giants such as OpenAI and Anthropic in a dilemma: should they postpone their listings to avoid a discount or accelerate their fundraising efforts? Meanwhile, concerns about the high valuations of tech stocks have increased, although experts believe that stock price failures are a “normal part of the process,” and investment banks may use mechanisms like the “green shoe option” to stabilize market prices.
1. SpaceX’s Stock Price Failure: A Flop Within a Month, $860 Billion in Market Value Lost
SpaceX completed its largest IPO in history on June 12 this year, raising $86 billion. In the initial days of trading, its stock price soared, with valuations briefly exceeding $2 trillion, making Elon Musk the world’s first trillionaire. However, within just a month, the stock price began to decline, and on the 15th, it fell below the initial offering price of $135.
Reasons for the Decline:
- The 13th test flight of the Starship was approaching (market concerns about potential failure affecting performance);
- The first quarterly financial report was about to be released (investors feared poor results);
- Restricted shares were about to become available for sale (VCs and employees might sell their stocks);
- Overall pressure on tech stocks due to market skepticism about high valuations.
2. Retail Investors Getting Hurt: South Korean Investors Lost Big
During SpaceX’s IPO, 20% of the shares were allocated to retail investors. Many believed that “internet-famous stocks” would inevitably rise in value. Local American retail investors bought $370 million in the first three days of trading, while South Korean investors (following the example of Chinese retail investors) invested $800 million on the first day. Now that the stock price has fallen below the initial offering price, these investors are in a difficult situation.
Experts warn that many retail investors invested money they couldn’t afford to lose, and the losses may lead them to feel that the market favors institutional investors—after all, institutions likely sold their shares at higher prices during the initial period, leaving retail investors to absorb the impact.
3. Future IPOs: Postpone or Accelerate?
SpaceX’s turmoil has left other companies planning to go public in a dilemma, with two main camps in the market:
- Postpone Camp: Greg Hart, a consultant at Carnegie, believes that no company wants to experience a drop in stock price immediately after listing, so many may decide to delay their IPOs.
- Accelerate Camp: Ryan Lee from Direxion argues that AI companies are in a “big model arms race” and urgently need funding, so they might rush to list before their competitors (for example, OpenAI could lose out on funds if it doesn’t go public quickly).
4. Stock Price Failures Are Not Uncommon: Meta Also Experienced a Drop
Stock price failures are not rare; for instance, Cerebras, an AI chip company that went public in May this year, also saw its stock price fall below the initial offering price. Experts explain:
- Price Discovery Phase: The market needs time to determine the true value of a company, and significant fluctuations at the beginning are normal.
- Pressure from Restricted Shares: When the lock-up periods for VC and employee shares expire, a large number of shares will be sold, causing prices to drop.
- Investment Banks Can Stabilize Markets: Underwriters often use the “green shoe option” to buy shares when prices fall. Given SpaceX’s large fundraising amount, investment banks are likely to make greater efforts to stabilize the market.
5. Is the Tech Stock Bubble About to Burst? Does SpaceX’s Failure Indicate a Problem?
Global tech stock indices have been under pressure, and there are concerns about high valuations. Some argue that SpaceX’s failure highlights issues with speculative market behavior and a lack of fundamental support (e.g., strategist Matthew Melley from Miller Tabak). Others suggest that this is just a normal part of the IPO process. However, there is indeed anxiety about high tech stock valuations, and if more new stocks fail to meet expectations, it could undermine investor confidence in the entire sector, affecting the fundraising and stock prices of other tech companies.
Conclusion
SpaceX’s stock price failure is a common challenge for newly listed companies. Its impact extends beyond SpaceX itself, affecting retail investors, future IPOs, and the valuation of tech stocks. For individual investors, it’s important to remember that new stocks are highly volatile, and one should avoid investing in them with a “gambler’s mentality,” especially in unprofitable tech companies. For companies, the timing of their IPOs becomes more crucial: should they wait for the market to recover or prioritize raising funds? The decision depends on their financial situation and competitive pressures.