SpaceX shares have breached their initial public offering (IPO) price of $135, plummeting 1.5% to $134 on Wednesday, in a sharp reversal from last month's record-breaking highs. This significant drop has shaved nearly £520 billion off the company's valuation, leaving investors who bought at IPO with paper losses.
The decline raises fresh concerns about investor appetite for high-growth tech companies and their corresponding valuations. Just last month, SpaceX's market capitalisation surpassed that of established Silicon Valley giants such as Microsoft and Amazon, reaching an astonishing $2.6 trillion. However, on Wednesday afternoon, this figure stood at a more modest $1.75 trillion.
Market analysts attribute the downturn to a combination of factors, including profit-taking, valuation reassessment, and the unwinding of extremely bullish positioning following the highly anticipated IPO. Daniela Hathorn, senior market analyst at Capital.com, notes that investors are re-evaluating their exposure to SpaceX's high-risk strategy of debt-funded AI spending.
A major contributor to investor jitters is SpaceX's substantial borrowing to finance costly technology infrastructure projects. The company raised a staggering $25 billion through the bond market last month, sparking debate among analysts about potential returns on these investments. Furthermore, the prospect of imminent Federal Reserve rate hikes exacerbates concerns about stretched valuations in the tech sector.
Investors will be keeping a close eye on SpaceX's first financial results since listing, due in the first week of August. Following this report, the IPO lock-up period will expire, allowing eligible employees and early shareholders to sell their holdings. This could lead to further downward pressure on the stock, as analysts predict.
The 13th Starship test flight is also closely watched, with successful development seen as crucial for reducing launch costs and enabling ambitious long-term projects, including orbital data centres and lunar missions. A well-timed and efficient execution of these plans could help alleviate investor concerns and boost the company's share price.