The IPO Crash: More Than Just Profit Taking

On the day of the launch, SpaceX stock shot up to $225. For a brief moment, the market capitalization was equal to six times that of Netflix, eight times that of Disney, and ten times that of McDonald's. Then the price dropped by a third in just three days. You have probably heard the usual explanations: market sentiment, profit taking, high valuation pressure. Those are all logical. But today I want to show you a different perspective.

On the worst-looking day for the stock, a message came out that most people missed. SpaceX announced that it borrowed $25 billion from the market. They already had $100.8 billion in cash, about a quarter of Singapore's total annual GDP, and they still wanted to borrow more. That gave me the feeling that something wasn't quite right. So let's dig deeper.

What Is the $25 Billion For?

The official reason for the new debt is to optimize the capital structure and refinance existing debts. That sounds normal. But which debts are we talking about? In February 2026, SpaceX did something big: it acquired Elon Musk's AI company, xAI. Prior to the merger, SpaceX secured a bridging loan of $25 billion from five major Wall Street banks. That is a short-term loan with a high interest rate, which must be converted into a long-term loan with a lower interest rate after the deal closes. The loan matures in September 2027. This new bond issuance therefore effectively pays off the old debt.

So far it sounds reasonable. But it gets more interesting. A bridge loan of $25 billion was secured to acquire xAI, Musk's own AI company. In other words, the new shareholders of SpaceX have transferred their money, and that money is taking a detour to pay off debt Musk accumulated with the acquisition of his other company. Let's look at xAI itself. In 2025, the company posted an operating loss of $6.4 billion and capital expenditures of $12.7 billion. This is not yet a profitable enterprise; it is still burning money. SpaceX shareholders are bearing the costs.

To use a simple analogy: imagine you have just sold your house for 3 million. The 3 million is in your account, but 2 million must go to pay off the mortgage, and 500,000 is earmarked for your children's tuition. The large amount is real. It is a lot. But that money is not available to spend, and that is the problem.

Why Nvidia's $25 Billion Raised a Cheer and SpaceX's Raised Eyebrows

In the same month that SpaceX incurred debt, Nvidia also raised $25 billion. The market's reaction: $85 billion in orders poured in, and the stock price rose by 3% that day. The same action, but completely opposite results. How is that possible? Because Nvidia's AI chips turn promises into concrete figures on the profit and loss statement, quarter after quarter. They are going full throttle in an already proven business model. Wall Street is only too happy to invest in it, because they clearly see how they will earn back their money.

SpaceX is different. While Starlink does generate cash flow, in the first quarter of 2026 the AI division alone burned through $7.7 billion in capital expenditures, more than Starlink plus the rocket operations combined. For the whole of 2025, free cash flow was negative $14.1 billion. That is essentially the annual budget of a medium-sized city evaporating every year. Nvidia's story can already be found in the profit and loss statement. SpaceX's story still revolves around PowerPoint presentations. It is merely a vision, at least for the time being.

The Lockup Expiry Timebomb

Most people think that the greatest uncertainty is over as soon as a company goes public. History teaches the opposite. After a stock market listing, companies face significant pressure from the publication of financial results. Early investors finally get a legal way to exit. Institutional investors now have a reason to sell. For many successful companies, the most volatile twelve months are the first year after the IPO.

SpaceX has a lockup release mechanism that most retail investors are unaware of, which makes this period particularly important. The release does not take place on fixed dates. It is linked to profit figures. On the second trading day after the publication of the quarterly figures, early institutional investors can sell up to 20% of their shares. These figures are expected at the end of July or beginning of August. If the price remains stable for a sufficient number of days before the publication, this could trigger an additional early release of 10%. That means up to 30% of the shares can come onto the market within a few weeks.

Imagine an early investor who has been backing Musk for 7 or 8 years. Their cost price is probably a fraction of the current price. The company is now listed. They can finally sell, but what do they see in front of them? Mountains of debt, persistent negative cash flow, xAI still burning money, quarterly losses that keep mounting. What do you think they will do if that opportunity arises? That is the crux. The decline we are seeing now does not even take into account the sales of those people. They are still waiting, and that does not bode well.

Musk's Counterweapon: Forward Guidance

Stock prices are not just about what a company is worth today. They are about what the market thinks it will be worth in the future. That means one of the most important skills of a CEO is not to earn an extra billion this quarter. It is to convince enough people that the next quarter will be even better. We call this forward guidance: the public statements by management regarding the outlook. That directly influences valuations.

Musk is one of the very best at this game. During Tesla's difficult times, when earnings were disappointing and analysts were pessimistic, Musk struck back with next-generation fully self-driving vehicles and his vision for an energy grid, after which the stock price rose again. The figures did not improve magically; expectations were tempered. On the day of the quarterly figures, we will almost certainly see the same scenario: timeline for the commercialization of Starship, pace of the rollout of the new Starlink, profitability trajectory of xAI. He has already publicly stated that SpaceX should achieve an annual revenue of 1 trillion dollars in 2030. I know that man.

But here is the tension. If Musk tells the story well enough to convince institutional investors to hold their shares, and the released shares they sell are absorbed, then the price stabilizes or even rebounds. But if the earnings figures are too poor or the story does not resonate, a volume of 30% of released shares can easily push the price further down. At this moment, no one knows which way it will go. The risk price of this stock is determined not by the company itself, not by the market capitalization, but by the judgment of early shareholders.

A Four-Step Framework for Any Post-IPO Stock

Before I share my opinion on SpaceX, let me summarize the really valuable points from today's analysis. The path we have just walked with SpaceX can be applied to any newly public company.

  • Step one: whose money is that? How much of the IPO money is earmarked for specific purposes?
  • Step two: what is the debt used for? Does it stimulate proven growth or does it merely fill old gaps?
  • Step three: what is the status of the actual cash flow? Revenue has been generated, but how quickly is the money being spent?
  • Step four: who owns the shares? When can they sell? What is their cost price? And what is the volume to be released?

Three Scenarios for SpaceX

Back to SpaceX. I see three possible scenarios.

  • Musk wins: second-quarter profit exceeds expectations, outlook is strong, institutional investors choose to hold, and the released shares get absorbed. The price stabilizes or rises to new highs. Tesla has walked this path before.
  • Market uncertainty: profit is moderate, Musk's story convinces some people but not everyone, released shares trickle out slowly, and the price fluctuates sideways for months. This is the most difficult scenario to trade and the one that takes out retail investors again and again.
  • The shares decide for themselves: profit is severely disappointing, or cracks appear in Musk's story. The release window opens and 30% of the shares start moving. The decline we are seeing now could be just the beginning of the downturn. In this scenario, the current price is clearly not the bottom.

The Real Risk Is Not the Rocket Science

The SpaceX story is compelling, but the market has a way of forcing discipline after the hype. The cash pile is huge, yet much of it is already spoken for. The debt is being repackaged, but its origin deserves scrutiny. And the lockup expiry in July is a structural fact that no amount of storytelling can erase.

What matters now is the reaction of early shareholders. If they see a convincing path to $1 trillion in revenue by 2030, they may hold. If they see mountains of debt and a cash burn that dwarfs the rocket business, they may sell. The next quarterly results will open that window. Now you know exactly what to watch.