Investor FOMO, ETF ‘Feeding Frenzy’ Fuel SpaceX’s Skyrocketing Price
The shares sold in last week’s IPO represented just 5% of its outstanding stock, leaving retail investors clawing for the limited float
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RocRockets aren’t the only things capable of reaching escape velocity: SpaceX surged 4.8% Tuesday, marking its third consecutive gain after a landmark initial public offering.
The company’s market capitalization even surpassed Amazon and Microsoft in intraday trading, briefly making it the fourth-biggest US company, before it settled in sixth place at a $2.6 trillion valuation. Some analysts remain wary.
A Cursor-y Glance
The excitement around SpaceX relies on the promise of unproven technologies that the company itself admits may not be commercially viable. SpaceX lost $4.9 billion on $18.7 billion in revenue last year. Amazon made $77.7 billion on $716.9 billion in revenue, and Microsoft netted $101.8 billion on $281.7 billion in revenue. One of these is not the same.
“The trading price implies all the company’s projects will pay off according to our most optimistic scenario, which depends on rapid Starship reusability and compelling commercialization of orbital data centers,” Morningstar analysts, who view SpaceX as highly overvalued, wrote Tuesday. They lowered their price for the stock, which closed at $201.80, by a dollar to $62. But SpaceX did make a significant move toward monetization. A $60 billion all-stock deal to acquire automated coding startup Cursor, a leader in “vibe coding” popular among tech developers, is expected to vault its xAI unit into a more competitive position against AI rivals OpenAI and Anthropic. Morningstar said an AI revenue boost could lift its bearish view of the stock to $154 to $169 per share. In the meantime, other enthusiastic market forces are fueling SpaceX’s boosters:
- Its valuation remains driven by a massive imbalance in supply and demand. The 555.6 million shares sold in last week’s IPO represented just 5% of its outstanding stock, leaving FOMO-ing retail investors clawing for the limited float: Vanda Research said retail traders bought $225.2 million in SpaceX stock in its first two days of trading, equal to 75% of all net buying of single stocks.
- Bloomberg Intelligence analyst Eric Balchunas tweeted that 11 leveraged ETFs benchmarked to SpaceX, vehicles that can amplify a stock’s movement, attracted more than $3 billion in volume Tuesday, up from $1 billion on their Monday debut, in a “total feeding frenzy.”
Consider the Options: Analysts at Concretum Group wrote that “hedge funds and other sophisticated market participants” are likely loading up on SpaceX because they can later sell it to index funds and ETFs. Another rallying force is the trading in SpaceX options, which began Tuesday with a record debut of 1.8 million contracts worth $2.8 billion trading hands. Call options outnumbered put options 1.3-1, according to Cboe Global Markets data, meaning more investors were looking to purchase the stock at a set price than sell.
