Technical factors are adding fuel to SpaceX's meme stock fire
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- SpaceX stock has jumped 55% above its $135 IPO price in less than three days as a public company, with little connection to the company's industrial segments or the broader economy.
- Only 555.6 million shares (about 5% of outstanding stock) were sold in the IPO, with an additional 83.3 million from the underwriters' 15% overallotment option; roughly 911 million insider shares remain locked until two days after SpaceX's first earnings report, expected in early August.
- SpaceX is being added to the FTSE Russell, MSCI, and Nasdaq-100 indexes over the coming weeks, and passive funds forced to buy the stock will encounter a public float roughly half the size of those locked insider shares, per Concretum Research.
- Options on SpaceX stock began trading Tuesday in large volumes, and market makers hedging call options must buy underlying shares, adding further buying pressure on the stock, according to options trader Michael Khouw.
- Hedge funds and arbitrageurs are likely accumulating SpaceX shares ahead of index inclusion to sell back to passive trackers, according to Concretum Research analysts.
- Direxion launched its Daily SpaceX Bull 2x ETF on Monday, joining other leveraged SpaceX ETFs that multiply the stock's daily moves using derivatives, futures, and swap agreements.
- Renaissance Macro Research found that 20 comparable blockbuster IPOs posted a median one-year return of -15.6%, with only 8 of 20 finishing in the green, labeling the post-IPO surge phenomenon a 'hype tax.'
Why it matters: SpaceX's 55% post-IPO surge is largely mechanical: index inclusion will force passive funds to buy into a public float of just 555.6 million shares, amplifying distortion. Niles expects valuation to matter after the Nasdaq-100 add, and Renaissance Macro data shows similar hyped IPOs averaged a -15.6% one-year return.
Ask SkimNews
