The market capitalization of SpaceX is approaching $3 trillion: what is the phenomenon and why it is temporary
SpaceX (SPCX) has made a dizzying leap, reaching a market capitalization of approximately $3 trillion. This figure allows the company to surpass tech giants like Amazon and Microsoft by this metric. Notably, this milestone was reached less than a week after its initial public offering, which valued the company at $1.75 trillion. Such dynamics have certainly captured the attention of the entire market.
The Mechanics of Scarcity: How 4% of Shares Work Wonders
The key to this phenomenon lies not in the company's fundamental business metrics, but in the unique structure of the offering. During the IPO, only about 4% of all issued shares were released to the market. The remaining 96% are locked up with insiders, employees, early investors, and large institutional holders under a phased unlocking schedule.
As a result, we are witnessing a classic effect of extremely low free-float. Demand from retail and institutional investors runs into a tiny volume of shares available for trading. There are virtually no sell orders in the order book, forcing the price to rise in leaps and bounds, each time attracting new sellers at increasingly higher levels. This is not so much an increase in the company's value as it is a price surge driven by scarce supply.
The Illusion of Capitalization: $3 Trillion on Paper
It is important to understand how this astronomical figure is calculated. Market capitalization is computed based on all issued shares, including that 96% that cannot yet be sold. Thus, the final valuation of $3 trillion is more of a mathematical abstraction, based on the last trade price for a microscopic fraction of the shares. The real value of the entire company is certainly high, but the current indicator is significantly inflated by speculative demand.
Upcoming Correction: When Supply Catches Up with Demand
The situation is temporary. The first major batch of shares will hit the market in August, following the release of the debut earnings report. Subsequent waves of unlocking are scheduled for the fall and will continue through December. Additionally, Elon Musk's shares are locked up for 366 days.
Once sellers gain access to the market, the balance of power will shift dramatically. If current demand has been largely speculative, then with the arrival of real supply, we may witness a rapid price contraction. A market that grew on scarcity can correct just as quickly when that scarcity is eliminated.
Expert Opinion: The SpaceX story is a classic example of how supply structure can create a false impression of market value. Investors entering a position at current levels should be extremely cautious. Once the unlocking process begins, volatility could be devastating for those who do not account for this fundamental risk factor.