10% of shares lent out in 10 days! Short sellers aggressively target SpaceX

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Just one month after completing the largest IPO in history, SpaceX has experienced a sharp reversal in market confidence. The stock price has fallen below its offering price, short sellers have profited about $4 billion, bond yields are approaching junk levels, and investor enthusiasm for this rocket and AI company under Elon Musk is rapidly fading.

This week, SpaceX’s share price fell below its $135 IPO price for the first time, down about 40% from the mid-June intraday high of $225. On Friday, the stock fell another 5%, closing at an all-time low of $123.99. At the same time, corporate bond yields have sharply increased, the credit default swap market has continued to expand, and the repricing of risk is now spreading to both its stocks and bonds.

Short-selling pressure is rapidly building. According to S3 Partners data, over the past month, short sellers betting on SpaceX’s share price dropping have collectively made about $4 billion in paper profits. Currently, about 30% of the approximately 640 million SpaceX shares in circulation have been borrowed for short selling, an increase of 10 percentage points over the past 10 days.

SLC Management managing director Dec Mullarkey said, “Investor enthusiasm for SpaceX seems to have cooled,” and the company’s stocks and bonds are “pricing in more risk.”

Lock-up Period Expiration Pressures the Market

One of the key drivers of this wave of sell-off is the upcoming large-scale share unlock. According to reports citing market sources, about 900 million SpaceX shares may enter circulation as early as next month as some pre-IPO investors’ lock-up periods expire, which will bring a massive influx of supply to the market.

The chief investment officer of a small North American hedge fund said, “As more shares hit the market in August, even if SpaceX announces it conquered the Moon and found gold in it, there won’t be enough money in the market to absorb these shares.” The fund reportedly made $20 million in July by shorting SpaceX.

This expectation has led some investors to choose to exit early, rather than wait for the liquidity shock after the shares are unlocked.

Bond Market Weakens in Tandem, CDS Market Heats Up Quickly

SpaceX’s bond market is also under pressure. The company completed a $25 billion large-scale bond issuance in late June, shortly after receiving an investment-grade credit rating from a major ratings agency. However, its bond yields are now approaching borrowing levels typical of junk-rated borrowers.

For example, the yield on a 30-year SpaceX bond has risen from 6.7% at issuance to 7.4%, with the bond price dropping to about 91% of face value. Meanwhile, the SpaceX credit default swap market emerged in late June, and the current CDS spread is at 158 basis points, meaning the annual cost of buying five-year default insurance on $10 million in bonds is about $158,000, a significant increase from $110,000 at the end of June.

The drop in SpaceX is not an isolated incident, but is happening amid broader pressure on highly valued tech stocks. U.S. semiconductor stocks ended the week with their worst single-week performance since last year’s “Liberation Day” market turmoil. The collective pullback of AI core sectors has further intensified the pressure on SpaceX shares.

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