Should You Buy SpaceX Stock Before the Second-Quarter Report?
SpaceX is timing an important event to happen after the report.
By Jennifer Saibil
After a full week of trading, Space Exploration Technologies (SPCX +0.98%) stock is up 15% from its first-day trading price. At this point, whoever wasn't able to participate in the initial public offering or didn't buy as soon as the opportunity arose may be biding their time for the next attractive entry point.
The next big event for SpaceX is its second-quarter earnings report, although there could be news pieces beforehand that move the stock, such as last week's announcement that it's going to acquire Cursor. Earnings reports give investors all sorts of new information about how the company is performing and what it's expecting for the future. These details help investors make informed decisions about their stocks.
Shareholders can expect to hear this kind of information in the SpaceX earnings release, which is likely to be scheduled for sometime at the end of July or beginning of August for the three-month period ended June 30. But there's something else connected to the timing that might impact whether or not it makes sense to buy SpaceX stock at that time.
The first lockup period is ending
When companies go public, they put restrictions on insiders from being able to sell shares immediately. This is meant to create stability while the stock enters the markets; if too many insiders were able to sell shares, it could flood the market and drive the price down. Keeping those shares out of the public market allows it to set a market price, and the stocks available for sale are predominantly the ones from the IPO. In this case, SpaceX's aim was to raise $75 billion, although it likely raised $86 billion with its overallotment. The company is worth $2.4 trillion right now, and the rest of the shares are locked up in various insider accounts, with Elon Musk having 85% ownership.
In a standard IPO, the lockup period usually ends after 180 days, at which time there is often a flood of new shares. SpaceX has an unusual arrangement with staggered times for ending restrictions. The first period is the day after the second-quarter earnings report, which means that's the first day the market could see a flood of SpaceX shares available.
Since earnings reports can move the stock, investors often evaluate whether it makes sense to buy the stock beforehand, expecting a positive report. In this case, whether or not there's a positive report, there's a good chance that the new shares on the market could drive the stock down. Even without the lockup ending, SpaceX stock looks overpriced right now, and this is another reason to steer clear for the time being.