3 Reasons SpaceX’s Stock Could Plummet Another 50%

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SpaceX’s (SPCX) initial public offering (“IPO”) was a success for the company, raising tens of billions of dollars at a very high valuation. SpaceX’s debut made a huge splash, registering as the largest IPO ever by market capitalization as CEO Elon Musk watched the stock surge higher shortly after it went public in mid-June.

SpaceX rocketed from its offering price of $135 per share to more than $225 in just days, earning early investors a fortune and turning Musk into a trillionaire.

But that was weeks ago. The stock has since plunged from that all-time high of $225.64 to about $114 a share now, a decline of nearly 50% in just weeks.

After such a huge drop, some bargain hunters may think it’s a good time to take a nibble at shares. In fact, SpaceX’s stock could easily sink another 50% lower and still be considered overvalued by many market watchers.

Meanwhile, SpaceX still faces at least three substantial downside risks that investors need to watch for.

1. The End of Massive Lock-ups Could Flood the Market With SpaceX Shares

One of the biggest headwinds to SpaceX over the next year is entirely technical in nature, rather than fundamental or operational. A flood of shares is set to hit the market as lock-up provisions expire, allowing insiders to sell their stock.

The purpose of an IPO lock-up is to reduce the conflict of interest between insiders, who know the company best, and outsiders, who are putting up their money. Firms going public often agree to a lock-up period of 180 days, giving insiders some incentive not to “pump-and-dump” a stock.

Recall that less than 5% of SpaceX stock is floated today, meaning the upcoming wave of lock-up expirations is set to pummel the market with shares.

Here’s the schedule over the coming weeks:

• August 6, 2026: Two days after SpaceX’s second-quarter earnings are reported, about 20% of eligible shares can be sold. If the stock trades higher than $175.50 for 5 of 10 trading days, a further 10% of eligible shares can be released early.

• August 21, 2026:About 7% of shares become eligible for trading.

• September 10, 2026: About 7% of shares become eligible for trading.

• September 25, 2026: About 7% of shares become eligible for trading.

• October 10, 2026: About 7% of shares become eligible for trading.

• October 25, 2026: About 7% of shares become eligible for trading.

• After third-quarter earnings: Up to 28% more shares become eligible for trading.

The numbers are staggering, as SpaceX’s expected float could increase by more than 10 times in just weeks. There are later expirations as well, but it’s this initial wave of expirations in the coming weeks that could lead to a huge number of shares actually hitting the market. That only happens if insiders cash out their shares – they’re not obligated to do so, of course.

The market has already taken some precautions on this front, with about 30% of shares already sold short, according to S3 Partners. But that’s a drop in the bucket – less than one-third of the current 5% float – of what could be unleashed following the company’s next earnings report.

A serious decline in the stock’s price, like what we’ve seen in the past few weeks, could bring even more selling, as insiders “get while the gettin’ is good.” Will demand for SpaceX shares be able to offset this potential surge in supply?

2. SpaceX Already Went Public at a Sky-High Valuation

Another serious concern is the valuation, which Musk and company pushed to unimaginable levels as part of its IPO process. There has been no shortage of investors calling SpaceX massively overvalued, and a look at the valuation over time provides insight into how the stock price was “engineered.”

As I detailed in this earlier article from February, Musk used a series of tender offers to boost the price:

• July 2024: A $210 billion valuation [as part of a tender offer]

• December 2024: A $350 billion valuation, based on a tender offer for $1.25 billion in stock (of which SpaceX bought $500 million worth).

• July 2025: A $400 billion valuation, based on a tender offer for $1 billion in stock (of which SpaceX bought an unspecified amount).

• December 2025: An approximately $800 billion valuation, based on a tender offer in which the company and other investors bought $2.56 billion in stock from insiders.

• February 2026: A merger between SpaceX and Musk-led artificial startup xAI – which itself acquired social media site X.com (formerly known as Twitter) in March 2024 – valued the new company at $1.25 trillion.

Musk used a series of tender offers in which investors were sold relatively few shares at a price that SpaceX set. In other words, SpaceX had its hand on the scale.

Beyond that, look at the math on that last transaction in February, when SpaceX acquired the Musk-owned xAI, a combination of its artificial intelligence (“AI”) unit and social-media platform X. In some financial sleight of hand, the money-losing xAI was valued at $250 billion in the tie-up, but SpaceX magically became worth $450 billion more in total as part of the deal.

In other words, SpaceX became worth an incremental $200 billion more – $450 billion minus the $250 billion paid for xAI – just for purchasing the money-losing company.

Then, Musk turned around and sold the newly merged company just four months later for about $500 billion more than that, at the $1.75 trillion IPO value. It had even been trying to push the valuation in excess of $2 trillion, but they walked back those expectations.

After such an outlandish run-up in the stock’s price, mostly before the company went public, it’s not surprising that the stock would fall after its IPO. Many independent analysts – unlike those from investment banks hoping for more lucrative business – are saying the stock is overvalued, and a 50% fall from here puts the stock’s market capitalization where it was privately valued at the start of 2026.

3. American AI Relies on the Success of OpenAI and Anthropic

The big AI model companies, OpenAI and Anthropic, are right at the center of what’s quickly shaping up to be a fast-growing AI bubble. They’re locking up tons of computing resources from AI data centers so that they have the processing power in place over the next three to five years.

For example, Anthropic signed a deal in May with SpaceX to lease all its compute capacity at the latter’s Colossus 1 data center in Memphis. It also signed a deal with Amazon (AMZN) for up to 5 gigawatts of capacity, with 1 gigawatt available by the end of 2026. Anthropic has a 5-gigawatt deal with Alphabet (GOOGL) and Broadcom (AVGO) slated to come online in 2027.

OpenAI has been in the same “land-grab” mode, locking down capacity and making spending commitments of $1.4 trillion, according to Barron’s.

The problem? OpenAI and Anthropic are spending cash like sailors on shore leave. OpenAI recorded an operating loss of $20.9 billion in 2025, and the number is trending much higher in 2026. These companies must continue to raise money from investors to meet their massive spending commitments and keep money circulating through the entire AI industry.

That means the whole American AI industry effectively relies on these two money-burners to raise more money successfully. SpaceX needs Anthropic to secure capital so that it can pay for the compute capacity it’s already signed on for – and it’s the same for all those leasing AI data centers.

If OpenAI and Anthropic can’t raise money, SpaceX’s AI business would likely be hurt badly.

Combine all three of these factors mentioned above, and SpaceX faces some serious downside risks.

Regards,

James Royal, PhD

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