Circle Your Calendars: Sept. 9 May Be a Huge Day for SpaceX and Its Shareholders
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Less than three months ago, on June 12, Elon Musk’s Space Exploration Technologies (SpaceX) (NASDAQ: SPCX) rewrote Wall Street’s record books. Not only did SpaceX become the largest-ever initial public offering (IPO), but the $85.7 billion raised from its debut, including the underwriters’ overallotment, nearly tripled the previous record holder, Saudi Aramco ($29.4 billion).
But SpaceX isn’t done making history. Due to its unique share unlock structure, Sept. 9 marks the next major milestone for the company and its shareholders.
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Insiders can cash out (again!) in a little over one week
When private companies go public, they usually prevent insiders — high-ranking executives, board members, and beneficial owners of at least 10% of a company’s outstanding shares — from selling their shares until 180 calendar days after the IPO. This lockup period is put in place to ensure that insiders don’t take advantage of early retail investor buzz.
However, Musk’s SpaceX has shunned tradition. The company’s mile-long registration statement (S-1) outlined an accelerated and staggered share-unlock schedule that allows certain insiders (Musk not included) to cash out far earlier than the 180-calendar-day mark.
Two trading days after SpaceX reported its second-quarter operating results on Aug. 4, approximately 911.5 million early release insider shares became eligible for sale. On the 70th calendar day after SpaceX’s debut (Aug. 20), another 319 million early release-eligible insider shares were added to the proverbial pot.
The next share-unlock milestone occurs on the 90th trading day post-IPO, which is Sept. 9. Once again, 319 million additional shares will be eligible for sale by select insiders. The next time-based milestones will occur on Sept. 24, Oct. 9, and, by virtue of the weekend, Oct. 26.
Space Exploration Technologies’ insider sales may swamp retail investors
But it’s not just the sheer volume of early release-eligible insider shares that can be dumped on retail investors that’s potentially concerning. It’s that SpaceX’s float was artificially low to begin with.
Usually, private companies will sell between 10% and 25% of their outstanding shares when going public. Musk’s company announced it was selling 555.6 million shares at $135 each just days before its June 12 IPO. While this might sound like a large number, it represented less than 5% of the company’s outstanding shares.
Source: finance.yahoo.com
