Insiders and Early Investors Are Selling SpaceX Stock and Index Funds Are Buying It. Which Side Do You Want to Be On?

SpaceX, the space exploration company, made an impressive debut on the stock market with an IPO that raised nearly $86 billion in stock. Institutional investors, as of the end of June, held a significant portion of the stock, with a total value exceeding $600 billion. In August, these investors began selling their shares, with more opportunities to do so in September and October. Meanwhile, index funds will be increasing their holdings of SpaceX stock as more shares become available on the open market.

In 2009, before investing in Nvidia, a similar pattern emerged where index funds began buying shares after a positive signal emerged. SpaceX has been added to popular stock indexes, such as the Nasdaq-100 and the Morningstar US Total Market, but not the S&P 500. The weight of SpaceX in these indexes is expected to increase as more shares are unlocked from their lockup periods.

This could lead to significant buying pressure on the stock from index fund managers. However, the early investors who initially sold their shares may be looking to reduce their concentration risk, which could create buying opportunities for those who are bullish on SpaceX's long-term potential, particularly in its AI and communications businesses.

Nonetheless, the stock is expected to experience volatility in the near term due to these lockup expirations and index rebalancing events.