If you follow the markets, or even casually look at business or economic news, chances are good that you’ve seen headlines about the plunging price of SpaceX shares. Formally called Space Exploration Technologies (ticker sign SPCX), the company had the largest IPO in history on June 12, 2026.
The sSpaceX IPO Rollercoaster
The $75 billion it brought in, 555.6 million shares at $135 each, was almost triple the previous record, according to The Motley Fool. Saudi Aramco raised $25.6 billion in its December 2019 IPO. At the end of the first trading day, shares jumped from the IPO price to close at 19% up at $160.95.
Prices continued upward for a couple of days, according to data from S&P Global Market Intelligence. June 15 saw a volume of 256.23 million shares with the price closing at $192.50. On Tuesday, June 16, volume was 322.15 million shares, with pricing closing at $201.80 per share. Then the reversal started. Wednesday brought 201.72 million shares traded, closing at $191.82. Thursday saw a closing price of $185.00 with a volume of 272.13 million. Friday was Juneteenth, which had no trading. Monday’s closing price was $154.60 with a 169.18 million volume. Earlier today, shares closed at $155.11.
The IPO Pattern
In 2021, a contributor to Nasdaq’s blogs, Martin Tillier, wrote of a pattern he frequently had seen in high-profile IPOs: “Investment bankers set a range for the new issue based on things like the company’s balance sheet, revenue, and prospects, then take the show on the road to present to potential investors. When they do, in some cases, those quaint, old-fashioned metrics are quickly forgotten, and the story becomes everything. If the story is appealing, the actual issue price is often well above the forecast range, and even then, unmet demand for the story stock ensures that early trading sees the stock soar.”
When Facebook went public in 2012, it was considered by many as the worst big IPO in a decade because there was no big initial bump in share price. At the time, I wrote on CBS News MoneyWatch that IPO values, like everything else, are a matter of perception.
Many people wanted a piece of the hot prospect. The bankers running the IPO process tried to set a price that would meet demand. In some sense, they succeeded more than they wished when there wasn’t a big pop on the first day. The offering price was close to where it would trend.
The Real Insiders’ Interest
That typically isn’t the goal. Most company insiders who own shares of stock as part of their compensation aren’t allowed to sell for a period of time, called the lockup, after the IPO. The point is to avoid putting too many shares out at one time, which could lower the price.
However, the bankers and the insiders who get to buy shares at the low price and retain the right to sell some amount of their holdings immediately have a different goal. To understand their strategy, it’s necessary to understand what studies have shown about IPOs.
“Historically, major IPOs have tended to have a good deal of volatility over the first 12 months,” Sam Grelck, an equity strategy analyst at Truist Advisory Services, a unit of Truist Financial, told CBS News this month. “Even those that have performed well in many cases have tended to have pretty significant drawdowns at some point.”
The volatility is important for the bankers and insiders, at least for the time immediately after the IPO. The higher the price goes, the more money the bankers and insiders can get. They don’t need to sell everything, just enough at a high price to sufficiently reduce the risk of the share price falling and their losing part of their investment.
That’s where smaller investors come in. Build the hype, sell the shares to people who will bid up the price for a share of that sure thing, and then look for the next IPO.
SpaceX is unusual both in how high it went and how far things fell off. According to 24/7 Wall Street, the $60 billion all-stock AI company Anysphere acquisition, a $20 billon debt offering, and the future end of the lockup have been particularly detrimental to the maintenance of the share prices.
But the model of driving up prices and using sales to retail investors to offload risk is an old one.
Read the full article here