SpaceX stock price suffered a sharp reversal, moving from this week’s high of $225 to the current $193. This retreat is happening as investors start booking profits ahead of the first Federal Reserve meeting of the Kevin Warsh era. It coincides with the broader retreat of US equities. So, is this just a temporary retreat or the start of a bear market?
Why the SpaceX Stock Jumped After its IPO
SpaceX stock has broadly done well since going public on Friday, with its market capitalization rising to over $2.5 trillion. It has now become larger than TSMC, Broadcom, Saudi Aramco, and Tesla.
The surge happened for three main reasons. First, there was substantial hype for the company because of its service offerings and its association with Elon Musk, who built Tesla into the biggest auto company by market capitalization. This hype pushed many retail and institutional investors to buy the shares.
Second, investors are optimistic that the company will soon be added to indexes, especially the Nasdaq, FTSE, and MSCI. This is notable as SpaceX sold just 555.6 million shares, representing just 5% of the company. Another 83.3 million shares will become available due to the 15% allocated to underwriters. This means that there is competition for the stock among retail and institutional investors.
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Third, there is optimism about the company’s total addressable market. SpaceX is a major player in key industries, including broadband internet via Starlink, satellite launches, and artificial intelligence (AI). Estimates are that its TAM has jumped to over $22 trillion.
History Suggests SPCX Stock May Dive Further
There is a likelihood that SpaceX stock may rebound soon as investors buy the dip. However, as we have warned before, history suggests that newly listed companies pump and then dump after a few days.
This situation has happened in some of the best-known companies in the world. For example, Meta Platforms surged after its IPO and then plunged by over 50% af few days later.
Most recently, Figma stock surged to $142 following its IPO, then plunged to a low of $19.20. Similarly, Circle soared to $300 before retreating to $49, and it now trades at around $82. Keep in mind that both are leading names in their respective industries—Figma is a dominant player in the design software market, while Circle is the second-largest stablecoin company.
The same trend has occurred with all the IPOs in the last five years. This includes popular names like Klarna, Instacart, Arm Holdings, and Rivian.
To be clear, history also shows that these companies have always rebounded after the initial crash. For example, Arm initially jumped to $68 after its IPO and then dropped to $45 a few days later. Today, it has jumped to $422. The same will likely happen with SpaceX.
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