SpaceX has become one of Wall Street’s biggest targets for short sellers just weeks after completing the largest initial public offering in history, as investors increasingly bet that the Elon Musk-led company’s blockbuster valuation could come under pressure.

The stock briefly slipped below its $135 IPO price on Wednesday before recovering to close at $135.27, marking the first time it has traded below its debut price since listing on the Nasdaq last month.

Shares have now fallen about 10% over the past five trading sessions.

According to data compiled by S3 Partners, short interest in SpaceX has climbed to 181 million shares, representing 28% of the company’s 646 million-share tradable float.

Bloomberg reported that this is the highest level ever recorded for a newly listed company during its first month of trading.

Unrealised gains for short sellers have already reached approximately $3.88 billion.

The pace of bearish positioning has accelerated sharply.

In the past week alone, investors added approximately 37 million shares worth about $5 billion to short positions.

S3 Partners’ head of predictive analytics, Ihor Dusaniwsky, said the recent weakness in the stock, combined with the approaching expiry of insider lockup restrictions, has encouraged additional bearish bets.

“Recent share price weakness, combined with the approaching lockup expiration, is further stimulating short-selling demand,” Dusaniwsky said.

Valuation concerns weigh on shares

The decline in SpaceX’s shares comes after its highly anticipated IPO valued the company at about $2.1 trillion following its first day of trading.

Despite the recent pullback, the company still trades at around 49 times expected revenue, making it one of the most expensive large-cap technology companies on Wall Street.

By comparison, fellow Musk-backed company Tesla trades at roughly 15 times expected revenue.

Investors have also become more cautious after SpaceX raised $25 billion through the bond market last month to finance the expansion of its artificial intelligence infrastructure.

The move added to broader concerns that aggressive AI-related capital spending across the technology sector could pressure future returns, particularly if interest rates remain elevated.

“The stock’s retreat seems to be a combination of profit-taking, valuation reassessment and the unwinding of extremely bullish positioning following one of the most anticipated listings in recent years,” said Daniela Hathorn, senior market analyst at Capital.com in a Reuters report.

Lockup expiry and earnings in focus

Investors are preparing for two key catalysts that could increase volatility over the coming weeks.

The company is expected to conduct its 13th Starship test flight, while second-quarter earnings are anticipated during the first week of August.

Attention is also turning to the expiry of lockup restrictions for insiders.

Although SpaceX completed the largest IPO in US history, less than 5% of its outstanding shares were made available for public trading, creating a scarcity that helped propel the stock following its debut.

As lockup restrictions begin to expire, millions of additional shares could enter the market, potentially increasing selling pressure.

Most analysts are still bullish on stocks

Despite the recent correction, Wall Street remains broadly optimistic on the company’s long-term prospects.

According to LSEG data, 27 of the 32 analysts covering the stock recommend buying it, while four maintain neutral ratings and only one has a sell recommendation.

However, several high-profile investors and analysts have come to reiterate their bearish stance after the stock price decline.

Former Fidelity Overseas Fund manager George Noble told Business Insider that investors should “expect the price to completely crash.”

“I think it could be half over the course of the year,” Noble said, adding that he believes a fair value for the shares is around $30, implying a decline of roughly 78% from current levels.

Jay Ritter, the economist widely known as “Mr. IPO” for his research on public listings, said he had considered shorting SpaceX before its market debut and was not surprised by the recent decline.

CFRA analyst Keith Snyder has also maintained his sell rating since the IPO.

“I am still negative on the valuation at these levels and haven’t seen anything that would change the story for me,” Snyder told Business Insider, adding that only substantially stronger growth would alter his view.

A Reuters analysis of 50 major US IPOs since 2010 found that companies whose shares fell below their IPO price within the first two months of trading generally went on to underperform those that remained above their offering price, although most still delivered positive long-term returns.

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