$25 Billion Short Bet on SpaceX, Musk Claims 'Short Sellers Won't Last'

The excitement surrounding SpaceX's IPO has not yet subsided, but short-selling pressure is rapidly increasing. With the first earnings report since going public and a massive stock lock-up expiration approaching, short positions now account for 32% of the outstanding shares, and Musk claims that institutions shorting SpaceX have a "very low probability of long-term survival."

After the close of U.S. markets on August 4, SpaceX (SPCX.O) will release its first quarterly earnings report since going public. As this critical moment approaches, short-selling funds continue to ramp up: According to estimates from S3 Partners, approximately 206 million shares of SpaceX stock are currently shorted, representing about 32% of its publicly traded outstanding shares, with a nominal short position size of around $25 billion.

This ratio has risen significantly in recent weeks. Data from S3 Partners shows that just last week, about 185 million shares of SpaceX were shorted, accounting for 29% of the outstanding shares; about a month ago, the estimated short position was around 40 million shares, representing approximately 5% to 7%.

Matthew Unterman, research director at S3, stated in an interview with CNBC: "We are seeing short sellers continuously increasing their exposure as several key catalyst events approach, including the company's first earnings report as a public company and the impending expiration of the lock-up period." The expiration of the lock-up period typically means that shares held by early investors can enter the market, and is therefore seen as a significant moment that could impact supply and demand for the stock.

On August 6, SpaceX will experience its first large-scale stock lock-up expiration since going public. Based on current estimates, this will become one of the largest stock lock-up expirations in capital market history: up to 911.5 million previously restricted shares will become eligible for sale, corresponding to a market value of up to $116 billion. This timing closely follows the company's first quarterly earnings disclosure.

This round of lock-up expiration is not the end. By the end of this year, billions of additional shares will gradually become eligible for trading. As the lock-up expiration is phased, the market is assessing the potential impact of this unusual pace on stock prices, liquidity, and market dynamics in the coming months.

Since completing the largest IPO in history last month, SpaceX's stock price has not been able to replicate the initial frenzy seen at its debut. As more shares gradually enter circulation, early investors and those who purchased company stock in the private market may seek to realize substantial returns; meanwhile, short sellers will also have more room to increase their bearish bets.

In response to the growing short positions, Elon Musk took to the X platform to warn investors betting against SpaceX that they may ultimately incur losses. He wrote: "Those companies maintaining large short positions in SpaceX have a very low probability of long-term survival."

Musk also stated: "I have said that if we achieve our goals, SpaceX's value will exceed that of Earth. This is clearly the case." This statement continues his consistent high expectations for the company's long-term potential but does not change the current market's divergence regarding valuation and the expansion of outstanding shares.

As the first earnings report approaches, investors are simultaneously evaluating SpaceX's long-term growth prospects, current valuation levels, and the potential impact of more shares entering circulation after the lock-up period ends. Bulls emphasize the company's leading position in the launch services market, the expansion of its Starlink business, and its artificial intelligence initiatives; skeptics, however, question how much future growth potential has not yet been priced into the current stock price.

In terms of stock price, SpaceX rose about 3% on Tuesday, ending a streak of seven consecutive trading days of decline. Previously, Macquarie analysts reaffirmed their "outperform" rating on the stock and suggested that investors buy on dips after recent weakness.

On that day, SpaceX's stock price rose to about $124, but remains below its IPO issuance price of $135. The stock had seen a significant pullback after its debut, and the upcoming earnings report is expected to provide investors with a more detailed view of its operational performance since the IPO, which could also serve as a direct trigger point for the next round of battles between bulls and bears.

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