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Unless you\u2019ve been on the moon, you know that Elon Musk\u2019s SpaceX just pulled off the biggest IPO of all time and raised about $86 billion in its public stock offering last month.\u00a0<\/p>\n
The reusable rocket maker did it while selling only a tiny sliver\u2014between 4% and 5%\u2014of its stock. The other 95%\u2014which consists of about 12.5 billion shares\u2014is being kept behind bars in one of the most byzantine, complicated lock-up schedules in history.<\/p>\n
To level set, lock-up periods are standard fare following an IPO; founders, top executives, and early venture investors usually agree not to sell their shares for 180 days. The point, as IPO advisor Lise Buyer of Class V Group explains, is twofold. First, it forces the people who know the company best to hold through at least one earnings report, so they can\u2019t dump stock on the public right before a bad quarter. Second, it sends a soothing signal during what could otherwise be a volatile and tenuous time in the life of a newly public company.\u00a0<\/p>\n
\u201cIt\u2019s a message to the new buyers that the people who know the company best still believe in it and are going to hang on,\u201d\u00a0 said Buyer.<\/p>\n
But when the lock-up expires, usually right after 180 days, a glut of stock typically hits the market and puts downward pressure on the stock price. During the past decade, underwriters have pushed buzzy tech companies into adopting more staggered or shortened release dates for insiders to sell their shares, some even contingent on earnings or stock-price increases to dampen the flow. Airbnb, DoorDash, Reddit, and Snowflake all either shortened the 180 days or staggered them.\u00a0<\/p>\n
SpaceX, however, took the flexible lockup approach, wrapped it in a puzzle, strapped it to an enigma, and sent it to live in a colony on Mars.<\/p>\n
There are 15 dates for sales in the public markets, according to the company\u2019s filings. For anyone who isn\u2019t Musk or a large investor, they can sell their stock during the 180-day window as it unlocks in slices of 7% on various dates in August, September, and October and then two trading days after SpaceX\u2019s Q2 2026 earnings, which will be its first as a public company. There\u2019s another big tranche after its next earnings report, and then whatever is left can be sold at 180 days. There are also dates tied to other earnings releases, plus stock-price increases.<\/p>\n
Avery Marquez, who tracks IPOs and lock-up structures as director of investment strategies at Renaissance Capital, described just how much of an outlier this is: \u201cThis is one of the most complicated, if not the most complicated lock-up we\u2019ve ever seen.\u201d<\/p>\n
Buyer said she\u2019s never seen such a large percentage of a company\u2019s stock unlock before 180 days are up.\u00a0<\/p>\n
\u201cThis is outside the bounds of anything we\u2019ve seen before,\u201d she said. \u201cI would expect their transfer agent will be doing shots of tequila, because it\u2019s going to be a little hard to manage,\u201d she joked.<\/p>\n
Why build a lock-up schedule this complicated? Buyer and Marquez said it\u2019s designed to keep the billions of shares behind bars from flooding the market all at once.<\/p>\n
To do so \u201ccould be catastrophic to the share price if everybody wanted to sell,\u201d said Marquez.<\/p>\n
Hans Tung, managing partner at Notable Capital and an early SpaceX investor through a company that was acquired by the rocket maker, said the schedule reads as an attempt to let shareholders ease out rather than see everything sold at once. Some will keep holding the stock \u201cbecause that\u2019s how they compound over a long period of time,\u201d while others who got in during the past five to 10 years will probably sell to show some liquidity, he said. <\/p>\n
\u201cI think this series of steps is designed for most shareholders to sell a bit each time,\u201d said Tung, whose fund has a small stake in SpaceX and a much larger position in Anthropic, which is also provides compute to SpaceX.<\/p>\n
Tung said he doesn\u2019t have inside information, but he noted that Anthropic and OpenAI, given their size, could end up adopting lockups similar to SpaceX if they go public.<\/p>\n
\u201cThe amount of money involved is just very big. So some people need to have exits along the way,\u201d he said. This is designed so that it\u2019s done over tranches instead of a free-for-all with a six month lockup and thereafter, everybody just do whatever they want.\u201d<\/p>\n
There\u2019s is another reason that could keep investors holding the stock, rather than selling right away, added Tung. The public market listing is the start of a new phase for SpaceX. And Musk\u2019s xAI, which is part of SpaceX, is likely to acquire some companies.<\/p>\n
He pointed to Cursor, the AI coding startup that SpaceX inked a compute deal with prior to the IPO. Days after the listing, SpaceX exercised an option to buy Cursor for $60 billion in SpaceX stock.<\/p>\n
Now that SpaceX is public, Musk has a liquid currency to fund more deals like this, Tung said\u2014and \u201cas he acquires more companies, it will be adding more value to the stock, so [investors] will hold on for even longer.\u201d<\/p>\n
SpaceX has had a stunning trajectory in its brief time in the public market. The stock, which priced at $135 in the IPO, opened up at $150 on its first day trading and surged all the way to $226 per share in the following days. While it has since given up some of those gains, the stock now trades at roughly $162, giving SpaceX a $2.61 trillion market cap.<\/p>\n
There\u2019s a wildcard in the mix. Musk holds roughly 6.4 billion shares making up about 82% of the voting power at SpaceX between his Class A and Class B supervoting 10-shares-in-one stock. Musk can\u2019t sell for 366 days, and there are no early-release provisions at all. But then in one shot, everything unlocks at once.<\/p>\n
Musk\u2019s unusual lock-up structure presents investors with a case of extremes, giving the stock a ballast of stability for the first year, followed by the potential for a supernova event. While it\u2019s almost inconceivable that Musk would choose to sell all his shares at that point given the negative signal it would send and the resulting impact on the company, the risk factor can\u2019t be discounted.<\/p>\n
Musk\u2019s track record with his Tesla stock may provide some indication of what to expect. Musk has held onto his stake in the electric carmaker and borrowed against it, avoiding the capital gains tax hit he would face. He has sold Tesla stock only as a last resort.\u00a0<\/p>\n
Jay Ritter, an IPO expert and University of Florida professor, said he wouldn\u2019t be surprised if Musk doesn\u2019t sell any SpaceX stock at all.\u00a0<\/p>\n
\u201cHe doesn\u2019t have to worry where his next meal is coming from, and if he does, it\u2019s probably going to be a tiny fraction of the, what, 6 billion shares that he owns,\u201d said Ritter.<\/p>\n
Musk might even buy more of SpaceX\u2019s, Marquez speculated.<\/p>\n
\u201cIt\u2019s possible we could see him buy shares when these are released. People start selling them, and he buys them up,\u201d\u00a0 she said. \u201cWith Elon Musk, anything is possible.\u201d\u00a0<\/p>\n
Tung doesn\u2019t expect Musk to jump in right away, but wouldn\u2019t rule out buybacks down the line. <\/p>\n
\u201cI don\u2019t think he will buy immediately, but I think over the course of the next five to 10 years, he will buy some [stock] back when he feels it\u2019s the right thing to do,\u201d he said. \u201cHe is who he is, and he\u2019s been doing this for a long time. I don\u2019t see any reason why he would behave differently.\u201d<\/p>\n
Buyer, who also declined to guess at Musk\u2019s plans, said the same.\u00a0<\/p>\n
\u201cHe has no use for the cash, and I\u2019m sure he believes that the stock is undervalued,\u201d she said. \u201cHe might not sell a single share.\u201d <\/p>\n
Whether Musk\u2019s investors can do the same remains to be seen.<\/p>\n<\/div>\n
#Elon #Musk #sell #single #SpaceX #share #yearthen #locks #crack #open<\/p>\n","protected":false},"excerpt":{"rendered":"
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