SpaceX (SPCX) insiders and early investors will be able to sell their stock for the first time on Thursday, when 911.5 million shares become eligible to trade — around 43% more than the 638.9 million shares the company floated in its June initial public offering.
The unlock will more than double SpaceX's public float, lifting the freely tradable portion of the company to 11.8% of shares outstanding from 4.9%.
The unlock arrives at a precarious moment, with the stock trading below its IPO price after a sharp post-earnings sell-off.
But SpaceX stock pulled higher in midday trade after plumbing new lows, bucking the conventional thinking that extra share supply would depress the price.
Why is there a share lockup?
When a company goes public, employees and pre-IPO investors typically agree to a lockup — a contractual window, usually 180 days, during which they cannot sell.
The expiration, or "unlock," is the date those restrictions lift and the previously restricted shares become eligible to trade. Because unlocks can flood the market with new supply, they often pressure a stock in the near term, particularly when insiders are sitting on large paper gains they may want to cash in.
What makes SpaceX's arrangement unusual is its structure. Rather than releasing all locked shares on a single date, the company staggered the expiration across nine tranches that free up stock over several months.
Thursday's is the first — and the largest.
At SpaceX's Aug. 5 close of $108.27, the eligible tranche is worth around $98.7 billion, a wave of supply large enough to put downward pressure on the stock.
What Wall Street is saying
Morningstar analyst Nicolas Owens expects a lot of it to sell.
"We believe that most of the available shares will come to market, because the existing sellers have low cost basis and long holding periods," he wrote, but he added that much of the damage may already be baked in: "It's conceivable that a good deal of the recent slump in SpaceX stock is precisely in anticipation of the dilution from the lockup."
Others caution that eligibility may not mean a tidal wave of selling.
"We recognize the upcoming lock-up expiration on Thursday, August 6 of 911.5M shares, potentially increasing the current float of 639M shares by 143%, but we also believe there has already been significant pre-positioning ahead of this first expiration, the largest of many over the next several months," JPMorgan's Doug Anmuth wrote.
Mizuho's Brett Linzey struck a similar note: "While the step-up in potential supply is meaningful, we think investors should understand that shares becoming eligible for sale does not mean the full tranche will be offered into the market."