Why SpaceX stock is tanking over 5% on Tuesday

SpaceX SPCX shares extended their decline on Tuesday as investors continued to weigh the prospect of a wave of insider share sales ahead of the company's first post-IPO lock-up expiration.

The SpaceX stock fell more than 5% to around $107, well below its IPO price of $135.

The broader market was mixed, with the S&P 500 little changed while the Nasdaq Composite fell 0.7%.

The VanEck Semiconductor ETF declined 3%, led by a 9% drop in Micron.

SpaceX has now erased more than $1.2 trillion in market value from its post-IPO peak, with shares falling sharply from a record high of $225.64 reached in June.

Monday marked the stock's 13th decline in the past 16 trading sessions, with shares closing down more than 1% at $113.50.

Lock-up expirations come into focus

Investor attention has increasingly shifted to the expiration of SpaceX's post-IPO lock-up agreements, beginning shortly after the company is expected to report its first quarterly earnings as a public company on August 4.

Two business days later, early investors will be eligible to sell nearly one billion shares, significantly more than the 629 million shares sold in the company's June 12 initial public offering.

Lock-up agreements restrict company insiders and early investors from selling shares immediately after an IPO.

As those restrictions expire over the coming year, more than 6.4 billion additional shares could become eligible for sale.

Morningstar equity analyst Nicolas Owens said expectations of increased share supply may already be weighing on the stock.

"It's conceivable that a good deal of the recent slump in SpaceX stock is precisely in anticipation of the dilution from the lockup," Owens said.

He added that substantial selling is likely once restrictions begin to expire because many early investors have held their positions for years and have low cost bases.

"We believe that most of the available shares will come to market, because the existing sellers have low cost basis and long holding periods," Owens said.

Following the first lock-up expiration on August 6, another 455.8 million shares are scheduled to become eligible for sale around August 20.

Additional lock-up expirations are scheduled throughout September and continue into the first anniversary of the IPO.

Most of the scheduled lock-up releases do not include shares owned by Chief Executive Elon Musk, certain senior executives or board members.

Musk's holdings are expected to become eligible for sale in June 2027, although he has previously said he does not intend to sell.

Analysts focus on Starship execution

KeyBanc reiterated its Sector Weight rating on SpaceX, saying continued progress on Starship remains the most important driver of the company's long-term growth prospects.

The firm described Starship Flight 13 as near perfection and said future flight tests will be critical to achieving full reusability and the rapid launch cadence needed to support the company's long-term ambitions.

KeyBanc also said it is seeking additional details on SpaceX's decision to stop accepting Falcon 9 launch bookings after 2028, particularly as Starship has yet to demonstrate sustained, rapid launch operations.

According to the firm, Starship underpins several of SpaceX's key growth initiatives, including the expansion of the next-generation Starlink satellite network, orbital data centres, and future lunar and Mars missions.

KeyBanc said investor attention is increasingly shifting from technical progress to the pace at which those initiatives can be commercialised.

The firm said SpaceX's valuation is becoming increasingly dependent on the timing of future milestones and the company's ability to commercialise its next generation of space and communications technologies.