Bets against SpaceX have yielded short sellers nearly $4 billion in paper profits

SpaceX shares have plummeted nearly 40% from their peak reached a month ago. Short sellers have already reaped about $4 billion in paper profits as a result, according to Bloomberg, citing analysts at S3 Partners. They recorded similar figures ahead of SpaceX’s launch of the Starship rocket and the company’s upcoming quarterly earnings report.

According to data from the analytics firm S3 Partners, traders betting on a decline in SpaceX shares have reaped $3.88 billion in paper profits due to the stock’s plunge over the past month. Bearish market participants opened short positions on approximately 181 million SpaceX shares, accounting for 28% of the total shares available for trading, Bloomberg reports.

This is one of the highest figures for companies in their first month after going public, said Igor Dusanevsky, an analyst at S3 Partners. “The recent weakness in prices, as well as expectations that the lock-up period [following the IPO] would soon expire, triggered short selling,” he added.

Over the past week, nearly 37 million SpaceX shares were sold short, totaling about $5 billion, according to Bloomberg.

Shares of Elon Musk’s company are trading around $135 each—the price set during the initial public offering. On July 15, they fell to a low of $132.15. In premarket trading on July 16, SpaceX shares are up 0.5%.

Since reaching its peak on June 16, SpaceX has lost a third of its value, shedding $860 billion in market capitalization. Investors are now focusing on the 13th test flight of the Starship rocket, scheduled for Thursday, July 16. The mission is expected to validate key SpaceX technologies necessary for increasing launch frequency and implementing the company’s long-term strategy, according to UBS, Switzerland’s largest bank. Ahead of this, despite a decline in the stock price over the past month, the bank’s analysts recommended buying SpaceX shares with a target price of $210. This implies a 55% upside potential relative to the closing price on July 15.

In addition, there has been a surge in short positions ahead of the company’s first-quarter earnings report, which is expected in the first week of August. During this same period, the next phase of the lock-up expiration for SpaceX shares following the IPO will begin, allowing some shareholders to sell their shares, Bloomberg notes. It is estimated that as part of this process, approximately 20% of previously restricted shares will be released onto the market.

SpaceX's IPO set a record in the history of the U.S. stock market: the company raised $86 billion. However, its shares were volatile during public trading: they surged nearly 50% in the first three days on the stock exchange, only to lose about a quarter of their value over the next three days, Bloomberg noted.

Analysts are generally optimistic about SpaceX stock: they have issued 28 buy recommendations (Buy and Overweight ratings) compared to six Hold recommendations and two Sell recommendations (Sell and Underweight), according to MarketWatch. The average price target of $240.65 implies a 78% increase from the July 15 closing price.

This article was AI-translated and verified by a human editor