Are Investors Already Over SpaceX?
SpaceX stock rose sharply after its IPO, but it has changed direction over the last few days.
By Reuben Gregg Brewer
Wall Street is a tough place. One day, a company is on top of the world, the next it is in the doghouse. Part of the problem is that investors have incredibly short attention spans. That's something that you need to think about if you own, or are considering buying, Space Exploration Technologies Corp. (SPCX +0.84%), better known as SpaceX. Here's what's going on.
The SpaceX din was deafening
The news flow around the SpaceX initial public offering was intense. Every major media outlet, from the finance sector to your local six o'clock news, was covering the event. There was a good reason for that, given that Elon Musk was attempting to raise more money from an IPO than had ever been raised before. He pulled it off, raking in $75 billion. When you add in the overallotment granted to the company's investment bankers, the sum rises to nearly $86 billion.
It is also notable that the SpaceX IPO was the first of what are expected to be several large IPOs, with Anthropic and OpenAI expected to follow. In other words, SpaceX was a kind of litmus test to see whether the market could absorb giant IPOs. The answer was clearly yes, noting that SpaceX priced its IPO at $135 a share, but it opened higher when it began trading. And it rose smartly the next couple of days, hitting a peak gain of roughly 50%.
The mood has shifted around SpaceX
It has been all downhill since then, with the stock up only around 15% from its IPO price as of this writing. To be fair, SpaceX has made some big moves since it went public just a few days ago. It announced a large, all-stock merger, and it issued bonds. So the story has changed, but likely not enough to justify the sizable U-turn in the stock price.
The more likely culprit is that investors are a mercurial bunch, rushing from one hot investment story to another. At this point, SpaceX is old news, even though its IPO was only a few days ago. (The ongoing geopolitical conflict in the Middle East is top of mind again.) To be fair, this isn't really unusual, as it happens to many IPO stocks. Before dumping the shares, which would effectively mean following the crowd, you need to consider why you bought the stock in the first place.
Did you get caught up in the SpaceX hype?
If you intended for SpaceX to be a long-term investment, you should probably focus more on business fundamentals than on the stock price. At this point, the business probably hasn't changed enough to justify a materially different long-term outlook. If you were hoping to make a quick profit, thinking that SpaceX would make you an instant millionaire, well, you might want to rethink your investment and, perhaps, your entire investment approach.
As the old saying goes, there are no free lunches on Wall Street. SpaceX is a money-losing start-up, but the long-term opportunity could be huge if Elon Musk achieves the goals he has set out. To benefit, you'll likely need to stick around for a long time.