SpaceX stock soars after IPO: Will it follow the Circle, Figma, Klarna path?

SpaceX stock price continued its strong rally on Monday, helped by the resilient demand from investors.

SPCX jumped to a high of $192, up sharply from the IPO price of $135.

Still, there is a risk that the stock will follow the same path as Circle CRCL, Figma (FIG), and Klarna (KLAR) did after their IPOs.

SpaceX stock jumped as three key factors aligned

The SPCX share price jumped as several major factors aligned. The first major catalyst behind the jump came after the US and Iran reached an agreement to reopen the Strait of Hormuz, which led to a risk-on sentiment in the market.

Top US indices jumped after the news, with the Dow Jones, S&P 500, and Nasdaq 100 indices reaching their all-time highs.

The Dow jumped by 468 points, while the other two spiked by 122 and 795 points, respectively.

The second catalyst for the rally was the rising optimism that the stock would be added to key indices.

Whenever a stock enters an index, it is mandatory for ETFs and mutual funds that track it to add into the position.

This move usually leads to more demand over time. 

Read more: Analyst says buy these two space stocks amid SpaceX-driven sell-off

Third, and most importantly, the surge is mostly because investors are still interested in the company because of its large total addressable market (TAM).

For example, it is the market leader in key industries like satellite launching and internet solutions. 

The company also has a large presence in the artificial intelligence industry through xAI.

xAI is a large business made up of X, formerly known as Twitter, and Grok, the top competitor to ChatGPT and Anthropic. 

Investors are also interested in the company because of Elon Musk, who many believe has become the best entrepreneur of our lifetime.

History suggests initial IPO pumps don’t last

The challenge for the SpaceX stock is that history suggests that initial pumps after the IPO don’t last. Indeed, a report found that 91% of these gains fade after the initial pumps. 

The best example of this is the companies that launched their IPOs last year. While much smaller than SpaceX, these were quality companies with solid products.

For example, Circle Internet Financial (CRCL) is a top leader in the booming stablecoin industry. Figma is a major company in the design industry that is disrupting firms like Adobe. Klarna, on the other hand, is a major player in the buy now, pay later (BNPL) industry.

Circle stock went bonkers after its IPO. moving from below $50 to $300 within days. After a while, the stock tumbled to $49 within a few months. 

Similarly, Klarna jumped to $57, much higher than the IPO level of $30. Today, the stock has plunged to $17, erasing billions of dollars in value.

Also, Figma stock jumped from $84 to a high of $142 within a few days. Today, it has also plunged to below $20.

The same trend has happened across most companies that went public in the past few years.

For example, Arm Holdings' stock jumped from $55 to $78 within a few days and then slipped to a low of $46. 

Therefore, there is a risk that the SpaceX stock price will retreat after the ongoing hype ends. This plunge, historically, has been a good place to buy the dip.