How SpaceX’s most-feared trading day turned into a 6% rally

That singular crossing is, in a microcosm, the story of how SpaceX’s most telegraphed selling event turned out to be far less dramatic—even positive—than the buildup suggested. 

For weeks, investors had been told to brace themselves for Thursday. The setup looked pretty ugly. Nearly a billion insider and employee shares, about 20% of the company, became eligible to sell at once, more than doubling the freely traded float overnight. The stock had already halved from that brief post-IPO high and had now slipped below its initial asking price, despite additional forced buying from index funds like the Nasdaq-100. So it seemed like adding extra supply would just be a clear downside bias, or at least create volatility.

Instead, after some slight weakness, the stock steadied, and then bounded up 6% higher. So, what gives?

Inside the company, no coordinated dash for the exits

The fear was that the insiders, who’d been stuck with up to millions in SpaceX stock, would rush to dump it all in a firesale. Yet for the insiders, the lockup expiry was more of a moment of pause. After all, for much of the past decade, SpaceX employees didn’t need an IPO to get paid: the company ran roughly semiannual buybacks, kind of internal liquidity events, well before Anthropic and others made the practice fashionable, that let staff sell some equity as they went.

According to a former employee who spent most of the 2010s at SpaceX, each round had turned into “a whole game-theory thing” of guessing how much to request. Demand from outside investors was often heavy enough that employees who asked to sell got cut back to a single-digit percentage of their position, the former employee told Fortune, asking to remain anonymous due to the nature of his work now.

“These are not people waiting to get their first dollar back,” the former employee said. “We’ve had chances over the past 10 years.”

Of course, now the lockup gives control to the shareholders, to borrow against their shares, move it into a trust, or diversify without asking the company’s permission. The former employee said that there are informal support groups among alumni, more for navigating a flood of financial advisors and figuring out what to do with sudden wealth than for organizing trades.  No one was planning a mass sell day.

“It’s probably the most talented engineering team that exists,” he said. “Whatever the magic is within those walls—they always figure out how to get stuff done.”

Everybody talks

If the people inside weren’t panicking, neither, it turns out, were the people watching from outside. The cliche, almost meme of Wall Street might apply here, analysts suggested to Fortune: this was priced in.

“The stock’s been down almost every day for the last three or four weeks in anticipation of this,” Gil Luria, a D.A Davidson analyst, said, pointing to a slide from around $152 on July 9 down toward $110.

If you’re an event-driven or hedge fund and a short-term trader, and you know there’s going to be more supply of shares coming, you sell it ahead of that event. Then, once that event happens, you cover your short–i.e., buy more stock.  “It’s always a cat-and-mouse game,” Luria added.

By that reading, this week’s slide might’ve had less to do with investors concerned about AI capex post-earnings, and more with investors taking profits before the event. 

Ivan Feinseth, chief investment officer at Tigress Financial Partners, described the dynamic as this healthy handoff. The unlock, this analyst argued, is “a largely technical event that accelerates the transition of ownership from insiders to a deeper, more stable public float, rather than a signal of deteriorating fundamentals.”

The lockup expiry is a liquidity event, the analysts explained, and so the big buyers wait for it. “”So if you want to establish a large position, instead of a continuous bid — which raises the price you’re buying at — you’d rather wait for a liquidity event, and then go to a broker to match you with a large order, so you’re not impacting the price as much.”

The buyer base, in this view, is fundamentally driven. Long-term growth managers, or event-driven hedge funds, are “being actively pitched this dislocation as an opportunity to build positions in what many see as a generational compounder at a temporarily depressed valuation,” Feinseth wrote. (Morgan Stanley, for its part, has used the “generational compounder” line to describe SpaceX).

Underneath it all, he noted, sits a still-intact thesis and roughly 92% year-over-year revenue growth. To the moon!