Space Exploration Technologies (SPCX 4.51%) entered the Nasdaq-100 index on July 7, and investors will hope it provides additional support for an already successful initial public offering (IPO). But what does the index inclusion really mean, and what can SpaceX investors expect in the future?
Where next for SpaceX?
The Nasdaq-100 index inclusion does matter. It triggers forced passive buying of the stock by funds (including exchange-traded funds, or ETFs) that track the Nasdaq-100 index. In addition, many actively managed funds may invest only in stocks listed in the Nasdaq-100 index, and others may require holdings in SpaceX stock to meet their fund’s weighting requirements. All of this is likely to provide some support for the share price.
Image source: Getty Images.
While this will occur, investors also need to be mindful of periodic bouts of selling as SpaceX’s lock-up expiry dates approach. Digging into the company’s Securities and Exchange Commission (SEC) filings makes it clear that the potential for periodic supply hitting the market is real. For reference, around 639 million shares were sold at IPO, and SpaceX has 13.17 billion shares outstanding.
|
Lock-Up Expiry Date |
Shares |
Notes |
|---|---|---|
|
Two days after the next earnings release |
Up to 911.5 million |
N/A |
|
Two days after the next earnings release |
Up to 455.8 million additional shares |
Contingent on the share price being more than 30% of the IPO price of $135 “for at least five of the 10 consecutive trading days ending on, and including, the First Earnings Release Date, the second full trading day immediately after the First Earnings Release Date.” |
|
Aug. 20 |
Up to 319 million |
N/A |
|
Sept. 9 |
319 million |
N/A |
|
Sept. 10 |
59.1 million |
Shares held by “affiliates” |
|
Sept. 24 |
328.4 million |
N/A |
|
Oct. 9 |
328.4 million |
N/A |
|
Oct. 24 |
328.4 million |
N/A |
|
Two days after the third-quarter earnings release |
Up to 1.3 billion |
N/A |
|
Dec. 8 |
Up to 328.4 million or up to 797.6 million |
The lower figure is released as outlined, and the upper figure is not |
Data source: Space Exploration Technologies SEC filings.
As you can see, significantly more shares could come to market than were sold at IPO, and that could prove more impactful than the Nasdaq-100 listing.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
