SpaceX earnings: Options market sees $225B valuation swing

SpaceX investors are bracing for one of the biggest earnings-driven moves ever seen for a newly listed company, with options traders pricing a swing of roughly $225 billion (approx. AED 826.5 billion) in the company's market value ahead of its first quarterly results on Tuesday.

According to Reuters, options imply that SpaceX shares could move about 15% in either direction following the earnings release, although current positioning suggests traders are leaning toward further downside.

The implied move is unusually large for a company of SpaceX's size.

The rocket and satellite company still commands a market capitalization of about $1.5 trillion (approx. AED 5.5 trillion) despite its shares having fallen 43% from the closing peak of $201.80 reached shortly after its record-breaking June 12 market debut.

Analysts said the combination of a sharp post-listing decline, a limited trading history and uncertainty over whether the company's financial performance can justify its lofty valuation has pushed options pricing well above levels typically seen for mature blue-chip companies.

By comparison, options markets had priced in only a 6.6% move for Microsoft ahead of its quarterly earnings last week.

Investors remain cautious ahead of results

SpaceX is expected to report a quarterly loss before interest and taxes of about $1.6 billion (approx. AED 5.7 billion) on revenue approaching $7 billion (approx. AED 25.7 billion).

"The overall volatility level is massive," Ophir Gottlieb, chief executive of Capital Market Laboratories, told Reuters.

Investor caution extends well beyond the options market.

The company's stock surged to an all-time intraday high of $225.64 just days after its public debut but has since fallen to around $114.53, reflecting concerns about valuation and the pace at which revenue can support its ambitious growth plans.

Adding to the uncertainty, Tuesday's earnings report will clear the way for approximately 911.5 million shares held by insiders, employees and early investors to become eligible for sale after the lock-up period expires on August 6.

That additional supply could weigh further on the stock if early shareholders decide to cash out.

Short sellers see opportunity

Bearish positioning has also intensified across other parts of the market.

Leveraged exchange-traded funds tracking SpaceX show investors remain optimistic overall, with assets of roughly $401.1 million (approx. AED 1.5 billion) across seven bullish single-stock ETFs.

However, nearly $296.8 million (approx. AED 1.1 billion) has flowed into inverse leveraged funds that profit when the stock declines, according to data from VettaFi.

That gap between bullish and bearish positioning is far narrower than is typically seen for stocks that have leveraged ETF products, highlighting growing investor caution.

Short sellers have also increased their bets against the company.

According to Peter Hillerberg, co-founder of Ortex Technologies, roughly 63% of SpaceX's free float is currently on loan to short sellers, close to a record high.

"There is almost no stock left to borrow," Hillerberg said.

Based on SpaceX's July 31 closing price of $108.37, Ortex estimates short sellers are sitting on approximately $18.4 billion (approx. AED 67.6 billion) in mark-to-market profits.

Meanwhile, investors attempting to hedge their positions have faced rising costs as heightened expectations for earnings volatility have pushed options premiums sharply higher.

Tuesday's earnings report will therefore not only offer Wall Street its first detailed look at SpaceX's financial performance as a public company but could also determine whether the recent slide in its shares deepens or reverses.