More than 900 million SpaceX shares unlock today. Here’s what to know

By John Towfighi, CNN

New York (CNN) — More than 900 million SpaceX shares are set to unlock Thursday, more than doubling the publicly available stock in Elon Musk’s space and AI company, which has struggled since its record-breaking IPO just weeks ago.

The scheduled lockup expiry will enable some employees and early investors who bought pre-IPO to sell, possibly driving the share price further down from its current all-time low.

The stock (SPCX) sank almost 14% Wednesday – its second worst day on record – and closed at $108.27 a share. The company’s Tuesday earnings report revealed larger-than-expected capital expenditures on artificial intelligence, while investors also geared up for the lockup expiry.

“You have a few different things triggering volatile action in the name, all happening at the same time,” Ryan Lee, senior vice president for product and strategy at Direxion, told CNN.

SpaceX on June 12 had the biggest IPO in history but went public with less than 5% of its total shares available for trading. Thursday’s scheduled unlocking of up to 911.5 million shares will more than double that available number. It’s the first in a series of lockup expirations across the next year.

More publicly available shares also sets up SpaceX to have a larger weighting in stock indexes like the Nasdaq 100, which it joined earlier this summer. The larger a company’s weighting, the more influence it has on the index’s performance.

The Nasdaq 100 weights stocks based on their market value and the number of shares available for trading. The index rebalances every three months and will rebalance in September, accounting for updated levels of publicly available SpaceX shares.

Another chapter in SpaceX’s journey

After the IPO, the scarce supply of shares paired with intense interest from retail investors sent the stock soaring. But the stock has since tumbled, down roughly 50% from its record high on June 16 and down 20% from the IPO target price of $135 a share.

Employees who have had shares awhile could have bought when the price was well below its current trading range. Those holders could be sitting on sizeable gains despite recent volatility, giving them an incentive to sell now, Lee at Direxion said.

“With these employee share unlocks, you’re going to have natural sellers entering the market,” Lee told CNN. “These are people who’ve (held the stock) far before it was printing at $135 on the IPO.”

Employees and early investors who have their shares unlocked could also decide to hold on to their stocks.

When a company goes public, it often doesn’t release all of its shares for public trading at once. Some shares are held by executives, others by funds and individual investors who got access when the company was private. Those pre-IPO shares can be subject to lockup periods.

Typically, a company will instill a 180-day lockup period before pre-IPO shares become eligible to trade. SpaceX, however, is following a less common model. SpaceX has a staggered, tiered calendar for unlocking its shares for public trading.

SpaceX has 7.571 billion Class A shares (mostly held by employees and investors) and almost 6 billion Class B shares (mostly held by Musk and executives). After Thursday’s lockup expiry, a series of more unlocks this year could bring more than 5 billion of those Class A shares into the market.

In 2027, extended lockup periods for company executives will begin to expire. Musk’s shares – worth more than 40% of the company’s value – are locked up until one year after the IPO.

In the Nasdaq 100, SpaceX currently has a weighting of about 1%. At its current stock price, considering 911.5 million shares unlock Thursday, SpaceX’s weight in the Nasdaq 100 could rise above 3.5% after the index rebalances in September, according to TD Securities. However, it all depends on how the stock performs.

“An influx of new shares can weigh on any stock in the short term, but that doesn’t change the underlying picture,” Justus Parmar, founder and CEO at Fortuna Investments and a SpaceX investor, said in an email to CNN. “What matters most is the strength of the business and Musk’s ability to keep executing on the long-term vision.”

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