SpaceX short sellers pocket $14.9b as Musk declares war

Short sellers have racked up more than 22 trillion won ($14.9 billion) in paper gains as SpaceX shares tumbled to roughly half the peak hit shortly after listing. Despite a public warning from Elon Musk, bearish bets are only growing — and with lock-up restrictions on more than $100 billion worth of insider shares set to expire next month, analysts warn that volatility could intensify further.

Reuters, citing data from financial analytics firm Ortex Technologies, reported Thursday that short sellers' paper gains on SpaceX had reached $15.5 billion.

SpaceX listed on the NASDAQ at an IPO price of $135 on June 12. The stock surged to an intraday high of $225.64 on June 16, its third trading day, but quickly gave back those gains. Thursday's closing price of $118.25 was down 47.6 percent from that intraday peak and 12.4 percent below the IPO price.

As the share price has fallen, short sellers' paper gains have swelled rapidly. When Reuters reported Ortex's estimate on July 16, the figure stood at $8.7 billion. In just one week it climbed by $6.8 billion — roughly 78 percent, or about 10 trillion won in additional paper profits.

The volume of shares on loan — a proxy for short-selling activity — has also risen. According to Ortex, about 49 percent of SpaceX's float was on loan as of July 16; by Tuesday that figure had climbed to about 360 million shares, or 56 percent of the float.

"There are no signs that SpaceX short sellers are taking profits," said Peter Hillerberg, co-founder of Ortex. "If anything, they are pushing their bearish bets even harder."

Market participants broadly attribute the share price weakness to concerns about SpaceX's lofty valuation and its heavy AI investment spending. Reuters noted that investor unease over the company's use of borrowed funds to expand AI investment has partly weighed on the stock.

The share price surged after listing on the back of a limited float, but the supply of potential sellers is set to grow sharply. A lock-up covering 911.5 million insider-held shares expires Aug. 6 — worth more than $100 billion at current prices. The expiry does not automatically trigger selling, but it will significantly expand the number of shares available to trade and could weigh on the stock.

As additional tranches of locked-up shares are released in sequence, the freely tradable float is projected to grow more than eightfold — from roughly 639 million shares now to about 5.33 billion shares by early December. For short sellers, a larger borrowable pool would open the door to further bearish bets.

The fallout from SpaceX's share price decline is also spreading to retail investors. According to Investopedia, SpaceX was added to the NASDAQ 100 index early — on July 7, just 15 trading days after its listing. As a result, funds tracking the NASDAQ 100, including the Invesco QQQ ETF with assets exceeding $450 billion, bought SpaceX shares at around $160. The stock has since fallen more than 20 percent.

The sharp buildup in short interest also raises the prospect of a short squeeze: if the share price rebounds, short sellers rushing to buy back shares to limit losses could amplify any upward move. The fact that retail and institutional interest remains high even with a limited float is another risk factor for bears.

Wall Street analysts are considerably more bullish than the short sellers. According to financial data firm Visible Alpha, nine of the 10 sell-side analysts covering SpaceX recommend buying the stock, with a median price target of $235.

Musk has also taken aim at short sellers publicly. In a post on X (formerly Twitter) on Friday, July 17, he wrote that companies holding significant short positions in SpaceX over the long term have a very low probability of survival.

This is not the first time Musk has clashed with short sellers. In 2018, he triggered a surge in Tesla's share price by claiming he had "funding secured" to take the company private. The statement led to a settlement with the US Securities and Exchange Commission (SEC), a $20 million fine, and his resignation as Tesla's board chairman.

In 2020, as Tesla's soaring share price inflicted tens of billions of dollars in losses on short sellers, Musk mocked them by selling red shorts — a pun combining "short," as in short selling, and "shorts," as in the garment.