SpaceX is set to launch its initial public offering (IPO) later this week in what is expected to be the largest stock market listing on record. The company plans to raise $75 billion at a $1.78 trillion valuation, even as early reports indicate the offering is heavily oversubscribed. PolyMarket traders predict that the company will achieve a $2 trillion valuation.
History Shows That SpaceX Stock Will Jump Then Crash
It is hard to predict how the SpaceX stock will trade after its IPO. However, history shows that even the best companies normally jump and then plunge after the IPOs.
A good example of this is Facebook, which went public in 2012. Its stock initially surged to $44, and then retreated to $18 a few weeks later. Similarly, Circle Internet Financial opened at $64 and then surged to $300 within days. It then slumped to $49 a few months later.
Figma, the top company in the design industry, initially soared to $143, then plunged to its current level of $20. Other recent IPOs, including companies like Medline, Gemini Space Station, and Bullish, have all plunged.
There are two main reasons why SpaceX stock will surge and then plunge. The first is that many retail investors will rush to buy the shares after their debut, a move that will push them higher.
The plunge will likely happen as the lucky investors who buy earlier start selling. We saw this when Cathie Wood’s Ark Invest bought Circle’s shares before the IPO and later sold some of them.
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There is also a concept known as “buy the rumor, sell the news.” This is a situation in which investors buy an asset before a major event and then sell it when the event occurs.
At the same time, the stock will open to a lockup expiry, a period where insiders are allowed to sell the shares. For most companies, this period is usually 180 days. In SpaceX’s case, this expiry period will be much longer, at 366 days. In most cases, stocks normally drop after the lockup expiry.
How to Short the SPCX Stock After the IPO
Fortunately, there are ways investors can benefit from a potential SpaceX stock crash if it happens. One way is to short the stock directly through a brokerage account if you have a margin account.
A key limitation for this option is that the initial fee will be substantially high, as only a small percentage of shares will be available for trading. The company plans to float less than 5% of its shares initially.
Another way for shorting the company is to buy put options. Instead of borrowing shares, you can buy puts that increase the value of your shares if the stock falls below the strike price before expiration.
Another common way to short SPCX stock, especially for foreign investors, is to use perpetual futures platforms like Hyperliquid that offer this service.
Finally, chances are that space stocks will drop if the SpaceX stock retreats after the IPO. As such, it will be possible for people to short these stocks or their ETFs, like NASA or UFO.
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