There are more than 28,000 Australian retail shareholders nursing a SpaceX sentiment sag – albeit, they are in good company alongside our country’s richest person, Gina Rinehart.
After Australia’s retail investors were given special permission (via prospectus additions) to buy directly into this blockbuster US float of Elon Musk’s rocket business in June, it was an irresistible punt for a cohort well known for their love of betting.
For Rinehart, investing $1.4 billion of her fortune into SpaceX reflected her well established Musk fan-girl credentials. It’s a big number, even if she can afford to lose some of it.
But for the other 28,000-plus Australian mum and dad punters, there hasn’t been much joy or excitement in the financial return on their investment.
After being the most hyped float of all time, the shares have spent half their public market life below the issue price. The only big winners were those that sold in the first week.
This week, the SpaceX share price has picked up a bit and now sits close to its issue price of $US135 ($191), so owners of the stock are no longer wearing an uncomfortable loss. It’s certainly better than last week’s low of $US104.83.
But the buzz around this company was so noisy that retail investors were looking for a big payday.
Retail investors didn’t punt on SpaceX just to get their money back.
Last Friday marked a pivot point in trading when retail investors globally turned from net buyers to net sellers, according to tracking data from Vanda Research. There could be many reasons for this, but re-assessing the reward against the risk would be one.
Vanda estimates that retail traders on average paid $US147 for SpaceX shares since the initial public offering. It also cites evidence that retail investors had been actively buying the stock when it dipped.
This average retail buy-in price is well below the current price, so the many sellers are simply cutting their losses.
SpaceX is the ultimate casino-type bet.
There are experts ascribing a value for SpaceX shares of $US800 and others who say it’s worth no more than $US100.
In only two months since its listing, the shares have moved between $US225 and $US104 – with little company news being reported, other than last week’s earnings report.
The good news is that the company reported revenue that was generally higher than analysts were expecting, and management’s revenue forecasts were bullish. This should have provided some comfort to retail investors that underneath all that hot-air hype, the actual business was making decent strides.
The bad news is that nothing in those performance numbers would support the nosebleed share prices at which SpaceX traded in the first couple of weeks after its float.
In addition, the high proportion of big investors betting the stock price will fall (as much as one-third of the stock on issue has been sold “short”) is a headwind to share-price performance.
The release last week of almost 1 billion shares (held by staff and early investors) meant more SpaceX shares were added to the tally of those eligible to trade. That (over) supply shock was absorbed relatively well, but it is the first of several releases of stock.
Each of the additions to the supply of stock will curb the scarcity value that helped push shares into the stratosphere in the first week following its debut.
Now that the three-ring circus of the SpaceX listing has packed up, all investors will need to adjust to the reality that SpaceX shares will move in tandem with the market’s moveable appetite for risk.
When US President Donald Trump’s war rhetoric towards Iran is toned down or when the Federal Reserve makes dovish comments on US interest rates, SpaceX shares (and plenty of other risky shares) will respond positively.
But at moments when investors succumb to a bout of AI fear, SpaceX shares will catch a bout of that negative sentiment.
Investors will also be watching whether management’s optimistic near-term revenue targets will be reached, rather than tracking Musk’s ambitions for earthlings to populate Mars.
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