SpaceX shares and bonds face rising short bets after record IPO

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SpaceX shares under pressure

Highlights

SpaceX shares fall over 5 per cent to $123.99, down 40 per cent from the mid-June intraday high, as short interest rises to 30 per cent.
Short sellers have booked about $4bn in paper profits over the past month, with share borrowing up 10 percentage points in the last 10 days amid weak market outlook.
The yield on SpaceX’s 30-year bond jumps to 7.4 per cent from 6.7 per cent, price drops to 91 per cent of face, and CDS spreads climb to 158 basis points.

Short positioning builds ahead of August share supply

As first reported by Financial Times, bearish positioning around SpaceX is intensifying just weeks after the company raised $86bn in the biggest initial public offering on record, at a valuation of almost $2tn. The stock closes at a fresh low of $123.99 on Friday after falling more than 5 per cent, and is down 40 per cent from its intraday high of $225 in mid-June.

Data from S3 Partners shows short sellers have booked about $4bn in paper profits over the past month. Around 30 per cent of the roughly 640mn SpaceX shares available for trading have been borrowed for short sales, up 10 percentage points over the past 10 days, suggesting investors are becoming more doubtful about the company’s near-term market outlook.

Dec Mullarkey, managing director of SLC Management, says investor enthusiasm for SpaceX appears to have cooled and that both the company’s equity and bonds are now pricing in more risk. SpaceX does not respond to a request for comment.

Traders are also watching the potential release of about 900mn additional shares as soon as next month when lock-up provisions for some pre-IPO investors expire. Market participants say concern over whether demand can absorb that new supply is prompting some investors to exit positions now.

Debt market signals wider concern over valuation

Pressure is also spreading through SpaceX’s credit markets after the company raised $25bn in a bond sale in late June, shortly after receiving an investment-grade rating from major agencies. Yields on its bonds are now trading closer to levels associated with junk-rated borrowers, indicating investors are demanding higher compensation for risk.

The yield on a 30-year SpaceX bond rises to 7.4 per cent from 6.7 per cent at issuance three weeks earlier, while the bond’s price falls to about 91 per cent of face value. In another sign of weakening confidence, a market for SpaceX credit default swaps emerges in late June.

Bloomberg data shows SpaceX CDS are trading at 158 basis points, up from levels implying an annual cost of about $110,000 at the end of June to insure $10mn of the company’s bonds for five years. The move comes as richly valued tech stocks tied to the AI investment boom are also under pressure, adding to investor caution around newly listed growth companies.

In our earlier article on extreme U.S. equity valuations, we noted that long-run gauges such as the S&P 500’s CAPE ratio, the excess CAPE yield and the Buffett indicator were flashing warning signs reminiscent of past market peaks. We also highlighted how AI-led optimism and heavy concentration in mega-cap tech can keep prices elevated, even as fiscal deficits, rising debt and broader financial fragility increase the odds of a sharp correction.

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