SpaceX shares tumbled dramatically on their inaugural day in the Nasdaq 100 Index, dropping 6.8 per cent overnight to $US149.47. This extended its sell-off from a June peak of $US201.80 by over 25 per cent, pushing the price towards its initial public offering (IPO) level of $US135. The decline occurred despite the rocket maker’s anticipated Nasdaq 100 entry, expected to prompt passive investment, and numerous bullish analyst recommendations from major banks.
Dave Allen of Plato Investment Management, who sold his stake early, labelled SpaceX a “meme stock” due to violent price swings and “unjustifiable” valuation, warning retail investors. He cited a price-to-earnings ratio near 1000. Elon Musk’s rocket manufacturer, SpaceX, primarily generates revenue through Starlink, its satellite internet constellation. The company also plans to colonise Mars and build data centres in space.
Minotaur Capital’s Thomas Rice has already built a short position in SpaceX at $US170, reflecting similar valuation scepticism. Rice noted that while volatility is common for IPOs reliant on future business projections, SpaceX faces unique uncertainties, including sustaining revenue growth and the profitability of its merged AI start-up, xAI. Analyst models, such as Morgan Stanley’s, show wide discrepancies between bull and bear cases, underscoring the stock’s sensitivity to assumptions.
Adam Myers of Pengana Capital anticipates further volatility, partly due to SpaceX joining the Nasdaq 100 via a new fast-track process after just 15 trading days. Pengana, which initiated its position in late 2020 at a $US50 billion valuation, plans to strategically sell down its stake over time. Myers described SpaceX as attracting unprecedented investor interest, with “hot money” flowing in and out.
