Key Points
The initial public offering (IPO) hype surrounding Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, has died down a bit. Now that it has cooled off, some investors might wonder if now is the time to buy the dip on the stock as it sits around the $2 trillion mark.
So, is now the right time to consider SpaceX stock? Or should you be patient? Let’s take a look.
SpaceX’s selling pressure could rise
The issue with hyped-up IPOs like SpaceX is that a lot of investors rush in, then sell quickly when they get 10% to 20% gains. After a while, this trend fulfills itself, and the stock starts to decline until buying and selling pressure balance out. This is just the market working its way toward an agreeable stock price, and we should see SpaceX stock stabilize over the next few months. However, there’s another trend that could start over the next few months.
Right now, early-stage SpaceX investors cannot sell their shares. Elon Musk is prohibited from selling SpaceX stock until 366 days after the IPO. So all of his gains are just on paper right now. There is also a staggered release of shares, starting after the Q4 earnings release and continuing through the Q2 2027 earnings for insiders and other investors. This will increase the float of shares available and likely result in a lower stock price because there is greater demand to sell shares.
As a result, SpaceX’s slide may not be over for some time. To top things off, SpaceX issued $25 billion in debt shortly after its IPO. That’s a bit of a red flag because SpaceX just raised over $85 billion by going public. That’s over $100 billion in newly found cash for SpaceX, and investors will want to see a solid return on investment with that money.
There are a lot of unknowns about SpaceX’s ability to execute from quarter to quarter. All of this suggests that investors need to be patient with SpaceX’s stock.
I think there is a far greater chance for the stock to slump than skyrocket over the short term. Investors would be best served by staying patient and waiting to see how the company executes as a public entity. This could save major headaches in the end and also allow investors to invest in other, less hyped-up stocks in the meantime that could deliver even greater growth than SpaceX.
There are far too many great stocks out there to be an early-stage SpaceX investor. Investors should look elsewhere first.
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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
