Wall Street Veteran "SpaceX (SPCX) Buy the Dip? Absolutely Not"...Why?

▲ SpaceX (SPCX), Downturn/AI Generated Image

A Wall Street investor issued a warning to individual investors who viewed the sharp decline in SpaceX (SPCX) stock as a buy-the-dip opportunity.

According to Benzinga on August 5 (local time), Gary Black, Managing Partner of The Future Fund, criticized the judgment of individual investors who bought SpaceX shares. He cited the potential release of 911.5 million new shares into the circulating market. Black stated, “It makes no sense to buy the dip when 911.5 million shares, which could double SpaceX's circulating share count, could hit the market tomorrow.”

According to Vanda Research, individual investors net purchased $22 million worth of SpaceX shares in the first hour after the market opened on Wednesday. During the same period, institutional investors sold shares after confirming the company's first earnings report since its listing. This indicates a complete reversal in the movements of individual and institutional investors.

The shares subject to this lock-up expiration account for approximately 7% of SpaceX's total outstanding shares of about 13.09 billion. Most of these shares are held by executives, employees, and early investors. The new shares that could be released to the market more than double the existing circulating share count. Additional lock-up expirations are also scheduled until June 2027.

SpaceX's stock price has fallen by about 52% from its high of approximately $225 recorded shortly after its listing in June. Last month, Black predicted that the stock price could fall below $100 within a few weeks due to weakening investor sentiment for AI-related stocks and an excessive valuation. The stock closed down 13.61% at $108.27 on Tuesday, then rebounded 1.61% in after-hours trading.

SpaceX delivered better-than-expected Q2 earnings, but $18.4 billion in capital expenditures weighed on the stock price. Most of the capital expenditures were invested in AI infrastructure. Dan Ives, Global Technology Research Head at Wedbush Securities, called the large-scale AI investment “essential infrastructure building” for a long-term vision. With expectations for improved performance and concerns about a massive release of shares simultaneously at play, SpaceX stock volatility is also increasing.

[Article Key Summary]

-Gary Black pointed out that buying the dip in SpaceX, ahead of the lock-up expiration of 911.5 million shares, “makes no sense.”

-Individual investors net purchased $22 million worth of shares in the first hour after the market opened, but institutional investors sold.

-SpaceX's stock price has fallen by about 52% from its high shortly after listing, and additional lock-up expirations are scheduled until June 2027.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*