THE NEW YORK TIMES: Elon Musk’s SpaceX briefly falls below IPO price of US$135

SpaceX, Elon Musk’s rocket and artificial intelligence company, dropped below its initial public offering price of $US135 ($A192.60) Wednesday before closing the day slightly above it, raising questions for other tech companies aiming to test the public markets.

SpaceX shares fell more than 2.5 per cent in intraday trading before ending the trading day at $US135.27.

Its IPO last month, which was the largest ever, raised $US85.7 billion and suggested that investors were hungry not only for SpaceX but also for potentially large public market debuts by the AI companies Anthropic and OpenAI.

Yet SpaceX’s bumpy ride may have Wall Street thinking otherwise.

The company’s market capitalisation briefly surpassed Amazon’s and Microsoft’s last month, nearing $US3 trillion after its shares reached $US225.64. It is now valued around $1.782 trillion after days of declines.

Already, OpenAI has been leaning toward holding off its public offering until next year.

CEO Sam Altman pushed the company’s investment bankers and others to find a way for the startup to be valued at $US1 trillion when it goes public, up from its last private valuation of $US730 billion.

SpaceX’s fluctuations were not unexpected given the exuberance among institutional and retail investors during the public offering and the relatively low number of shares available to trade.

Fewer than 5 per cent of the company’s outstanding shares are able to be bought and sold, and the heavy demand in the days after the IPO contributed to the spike in price.

Drew Cupps, a portfolio manager at Polen Capital, which invested in SpaceX after its public offering, attributed the stock’s drop to a “reversal in investor optimism around data center spending.”

“There is nothing positive about a breach of an IPO price, though it’s not a death knell either,” he said.

He recounted how Facebook, now called Meta, fell below its IPO price after its 2012 public offering and stayed below that threshold for about a year before soaring.

In the coming months, more SpaceX stock will become available to trade as lockup agreements — which prevent shareholders from getting rid of shares immediately after an IPO — expire, allowing employees and early investors to sell their shares. More sellers and an increased supply of shares could weaken the stock price.

In an expected move, SpaceX gained expedited entry to the Nasdaq-100 index last week, essentially forcing index funds to buy up the stock. Its share price, however, did not experience a boost.

SpaceX’s falling share price follows a broader pullback in the stock market, as investors question the durability of huge bets made by AI companies. Shares of a group of behemoth tech stocks called the Magnificent Seven — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — fell roughly 9 per cent in June.

Other recently public companies have also suffered. Cerebras, a Silicon Valley AI chipmaker, has been trading below its IPO price of $185 a share after raising $US5.55 billion in May.

Shares of SK Hynix, a memory chipmaker in South Korea, have vacillated since raising $26.5 billion in a U.S. listing last week but are still trading above the IPO price of $US149.

In recent IPOs, share prices rose 32 per cent, on average, after the first day of trading but were down 26 per cent after 12 months, J.P. Morgan analysts said in a report.

SpaceX’s stock performance after its public offering turned Mr Musk into the world’s first trillionaire. With the decline in the rocket maker’s stock, he has lost that 13-figure net worth and is now worth around $850 billion, according to the Bloomberg Billionaires Index.

After its IPO, SpaceX used its ballooning stock price to close a $US60 billion, all-stock deal for Cursor, a startup that develops AI tools to write computer code.

Speculation that Mr Musk could also use SpaceX to acquire his electric carmaker, Tesla, which has a market valuation of $US1.481 trillion, has also grown.