A significant selloff in SpaceX shares continued on Thursday, reversing a substantial portion of the rocket company’s gains following its highly anticipated public debut. This market correction was triggered by concerns among analysts regarding its $60 billion all-stock acquisition of AI coding startup Cursor.
Key Market Developments
SpaceX’s stock experienced a further decline of over 6% on Thursday, trading just shy of $179. This follows a nearly 5% drop on Wednesday and a significant 20% decrease from its peak price above $225 reached on Tuesday.
This downturn has resulted in an estimated reduction of approximately $620 billion in SpaceX’s market valuation since its Tuesday high. The company’s market capitalization has fallen from around $2.99 trillion to $2.37 trillion. This shift has repositioned SpaceX from the world’s fourth-largest company, ahead of Amazon and Microsoft, to seventh place, now trailing TSMC, which holds the sixth position with a valuation of $2.38 trillion.
On Tuesday, SpaceX formally announced its intention to acquire Cursor for $60 billion in stock. This transaction is expected to result in approximately 3.4% dilution, meaning existing investor stakes will represent a smaller percentage of the company, relative to its IPO valuation of $1.77 trillion.
In response to the news, Morningstar analysts revised their fair value estimate for SpaceX downwards to $62 from $63. They cited the “sizable dilution” from the Cursor acquisition, noting that even in a best-case scenario, where Cursor’s AI revenue significantly improves, the shares might only be priced at $169.
The recent stock performance stands in stark contrast to the record-breaking investor demand observed since SpaceX’s market debut. Data from a Vanda Research note on Wednesday indicated that investors purchased $369.8 million in SpaceX shares during its initial three trading sessions, more than four times the $88.2 million invested in Nvidia over the same period.
Option trading for SpaceX also commenced on Tuesday, providing investors with avenues to speculate on the stock’s future movements, including betting against it. Susquehanna analyst Chris Murphy noted in a research update that there is a 15% probability of the stock depreciating by half within the next three months, influenced by option trading activity.
Analyst Perspective on the Acquisition
Timothy Horan, an analyst at Oppenheimer, expressed a positive view on SpaceX’s acquisition of Cursor in a note released Thursday. Horan believes the deal could potentially drive SpaceX shares up to $250 by year-end, an upward revision from his previous forecast of $190. He stated that the acquisition is mutually beneficial, offering Cursor access to SpaceX’s extensive computing resources, while SpaceX gains Cursor’s advanced AI technology, engineering talent, training data, and established user base.
Impact on Elon Musk’s Valuation
The ongoing decline in SpaceX shares has significantly impacted CEO Elon Musk’s personal net worth. According to Forbes’ estimations, his fortune has decreased by $67.8 billion, bringing his total net worth to approximately $1.2 trillion. Musk’s wealth had previously reached a record high exceeding $1.4 trillion during SpaceX’s initial three-day surge. Despite this recent decrease, Musk remains the world’s wealthiest individual, well ahead of Google cofounder Larry Page, whose net worth stands at $300.8 billion.
Background and Market Dynamics
SpaceX shares saw a remarkable surge of 50% above their IPO price of $135 during their initial three-day trading period, fueled by unprecedented investor demand. Prior to the IPO, Morningstar analysts had already cautioned investors about trading SpaceX stock, arguing that the company was “significantly overvalued” and that its market valuation was excessively dependent on its “novel and untested” technological claims. In March, Franco Granda of PitchBook suggested that SpaceX’s trading patterns might resemble those of Tesla, but amplified, given the inherent volatility often seen in Musk’s other major venture. Some market observers have labeled SpaceX as the latest “meme stock,” with Swissquote analyst Ipek Ozkardeskaya suggesting that investors are purchasing shares with the expectation of future price appreciation driven by continued demand, rather than solely on fundamental value. Ozkardeskaya also pointed out that SpaceX is incurring substantial cash burn, with its Starlink business struggling to offset the heavy expenditures associated with space exploration initiatives.
Business Style Takeaway: The market’s reaction to SpaceX’s acquisition of Cursor highlights investor scrutiny over valuation and strategic rationale, even for high-profile tech companies. This event underscores the delicate balance between growth ambitions, potential dilution, and the fundamental valuation of innovative ventures in the current investment climate.
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