A shocking downturn in Elon Musk's SpaceX has wiped out nearly $1 billion in paper profits for investors like Australian billionaire Gina Rinehart, who had banked on the company's remarkable IPO valuation. The space exploration firm's share price plummeted to $131.11 on Thursday, a steep drop from its debut price of $135 per share, wiping out an estimated A$714 million (US$500 million) in potential gains for Hancock Prospecting.
SpaceX's meteoric rise to a market value of over US$2.6 trillion within the first three days of listing has given way to a sharp decline, with its market capitalisation plummeting to a record low of US$1.72 trillion. This slide has also impacted Elon Musk's personal wealth, which Forbes estimates has fallen to US$838 billion as of Thursday.
Hancock Prospecting acquired a significant stake in SpaceX during the largest debut in stock market history, although the exact value of its initial purchase remains undisclosed. Based on reports suggesting an investment of over US$1 billion, Rinehart is estimated to have incurred further paper losses of approximately A$43,000 (US$30,000) below the IPO price, following Thursday's closing.
Despite the significant paper losses, market analyst Tony Sycamore of IG Australia believes Rinehart will remain unfazed. He suggests that investors of her calibre are typically focused on long-term prospects, particularly when backing visionary figures like Elon Musk, who "excels in every regard" according to Rinehart's own endorsement.
The recent decline in SpaceX's share price, which has seen falls in seven of the last eight trading sessions, is attributed by Sycamore to an easing of initial market euphoria. The company's largest single-day drop occurred on 22 June, following an announcement of plans to issue billions more in debt through bonds. This volatility has also created opportunities for short sellers, with Bloomberg reporting profits of US$3.88 billion (A$5.55 billion) for those betting against SpaceX.
While some institutional investors reportedly sold out early to secure profits, many retail investors, particularly in Australia, are expected to maintain their positions, viewing SpaceX as a long-term investment. CommSec, Australia's leading retail share broker, noted a record 28,000 applications for SpaceX shares, highlighting the widespread interest in the tech frontier. Sycamore advises that such investments in the "new frontier of tech stocks" are not expected to yield returns in months or a year, but rather over a decade-long horizon.