SpaceX Faces Bigger Test Than Earnings as Lockup Expires Aug. 6, With 912 Million Shares Eligible for Release

Up to 912 million shares could gradually enter the market

Stock sinks more than 10% despite narrower-than-expected loss in first earnings report

SpaceX fell more than 10% in premarket trading on Aug. 5, even after the company reported a narrower loss in its first earnings report as a public company and projected strong future revenue. Investor concern over the expiration of lockup restrictions for early backers and employees beginning Aug. 6 is weighing on the stock.

As of 7:30 a.m. in New York on Aug. 5, SpaceX was trading at $110 a share, down 11%.

A bigger challenge than earnings may begin on Aug. 6, when lockup restrictions start to expire. That means a large volume of shares held by insiders and early investors could reach the market. As many as 912 million shares may be released, adding pressure to the stock.

That is a massive amount considering that about 640 million shares initially entered the market after the IPO, including 555.55 million newly issued shares and shares sold through the overallotment option.

Who decides to sell or reduce a stake will be an important signal for market sentiment on the company's outlook, Reuters reported, citing Wall Street.

Robert Hackel, chief executive officer of institutional brokerage RF Lafferty & Co., said some holders are looking to sell part of their SpaceX stakes to buy private shares in IPO candidates including Anthropic, OpenAI and defense-technology startup Anduril.

Matt Kennedy, chief strategist at Renaissance Capital, which provides IPO research and investment funds, said SpaceX employees and early investors have made enormous gains, giving them a strong incentive to take profits and diversify their portfolios.

Brian Mulberry, chief market strategist at Zacks Investment Management, said the sharp post-earnings drop likely reflected concern over the approaching lockup expiration.

After an IPO, insiders are typically barred from selling shares for a set period. In SpaceX's case, banks structured the release so billions of shares would be sold gradually over a year rather than all at once. The lockup expiration will unfold over nearly a full year. Shares held by early investors including Founders Fund, Sequoia Capital, Alphabet and Fidelity, along with employees, are estimated at 4.6 billion to 6.4 billion.

The public float is currently so small that the first lockup expiration alone could more than double the number of tradable shares. If a price-based early release provision is triggered, the float could more than triple.

Andrew Chanin, chief executive officer of Procure Asset Management, which manages the Procure Space ETF, ticker UFO, said the shares that come to market after the lockup ends will test whether early investors still back the company for the long term. The fund has invested about 6% of its assets in SpaceX.

Lucas Muehlbauer, an analyst at IPOX, also said the scale of selling by early investors will be a strong signal of confidence in SpaceX's outlook.

Gabriel Shahin, founder of Falcon Wealth Planning, said he is tracking whether large sales emerge through his network of SpaceX insiders and employees. His assessment is that insiders generally retain long-term conviction and that few are looking to sell aggressively.

Still, Shahin said upcoming lockup expiration dates are likely to intensify trading volatility. SpaceX's share swings have already made it difficult for investors to hedge downside moves because options prices are, in his words, at an absurdly high level.

Separately, SpaceX said in its first earnings report since going public that revenue for April through June reached $7.8 billion. That was up from $4.1 billion a year earlier and topped Wall Street estimates. Starlink, which accounts for more than half of total revenue, posted a 66% increase in sales. Revenue from the AI business, which Elon Musk has presented as a future growth driver, surged about 250%.

The operating loss narrowed to $143 million in the second quarter from $970 million a year earlier. Operating losses in the AI division shrank, while Starlink operating profit rose 79%.

Investor concern increased, however, after second-quarter capital expenditures jumped to $18.4 billion from $2.83 billion a year earlier, a more than sixfold increase.

Chief Financial Officer Brett Johnson said the payback period on new investments for AI computing is less than one year, seeking to ease investor concern over capital spending.

Starlink, the satellite-internet unit that serves as one of the company's main financial engines, ended the quarter with 12 million subscribers, double the level a year earlier. But average revenue per user fell 22% from a year earlier after the company introduced lower-priced plans.

Revenue in the space segment rose 29% from a year earlier. That business, which includes commercial launches, government missions and Starship development, remains a source of heavy spending and uncertainty.

In recent years, SpaceX has focused more on launches for building its own satellite network than on carrying third-party payloads. It has also continued to spend heavily on Starship development. The company said it expects to reach $100 billion in annual revenue by the end of this year. It also announced plans to launch at least 1,000 next-generation V3 Starlink satellites and compete in mobile communications.

Steve Westly, founder of the Westly Group and a former Tesla board member, told CNBC on Aug. 5 that while SpaceX has emphasized its market leadership, investors want to know how fast it can grow and how much it will cost to achieve profitability.

Critics also say the strategy of using Starlink profit to fund the AI business and Starship launches until those operations can stand on their own is not sustainable.

Kim Jung-a, guest reporter