SpaceX's December Lockup Is Nearly the Biggest Share Unlock in IPO History. History Says This Is What Happens Next.
SpaceX conducted its IPO with a surprisingly low public float.
SpaceX, the aerospace company founded by Elon Musk, made headlines when it conducted its initial public offering (IPO) this summer. Unlike many other tech companies that typically offer between 15% and 20% of their shares to the public during their IPOs, SpaceX decided to sell only 5% of its total outstanding shares. This decision resulted in a low public float, which is the portion of a company's shares that are available for trading by the public.
A low public float can lead to increased volatility, as large volumes of buy or sell orders can easily overwhelm the available supply.
Following the IPO, SpaceX's public float began to increase gradually. In August, an additional 20% of shares became available when the company released its second-quarter earnings. In October, three more unlocking events took place, with another 28% of shares becoming available. Throughout the following months, SpaceX continued to unlock shares, with another 17% set to become publicly tradable in December.
While the impact of share unlocks on a company's stock price can be uncertain, history provides some insight. In October, SpaceX experienced the largest share unlock of any company in history, freeing up over $180 billion worth of stock. This significant share unlock led to a volatile period, with shares initially surging from $150 to $170 before dropping by 9% on the day when 1.3 billion shares were unlocked. By the end of October, SpaceX's stock price fell below its IPO price.
However, after the largest unlocking period before December, which saw roughly $100 billion in shares become available for trading, SpaceX's stock price rallied, ending the month with a 32% gain. Generally, it is difficult to predict the exact impact of a major share unlock on a stock's price, as markets are forward-looking and quickly adjust to anticipated price movements. On average, a 1% to 3% drop during an unlocking event is expected, but this is a rough estimate for a single security.
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