Following its mega-IPO, shares of Elon Musk’s SpaceX rocketed to new heights, peaking at just over $222 on Tuesday morning.
But as any rocket company knows, what comes up must come down. Shares started to tumble on Tuesday and then Wednesday, wiping out well over $100 billion in market capitalization. Shares slipped by almost five percent on Wednesday alone, the company’s first day of overall decline.
And as Bloomberg reports, the company had a bad night as well, with shares down another 3 or 4 percent in premarket trading. What happens today is anyone’s guess, but investors should be ready for plenty more volatility. After all, it’s Elon Musk we’re talking about here, a man who has built his business empire on making extremely lofty promises — and only rarely making good on them.
SpaceX’s multitrillion-dollar valuation has little to do with business fundamentals, and its path to profitability is as murky as ever. The company lost billions of dollars last year. Its merger with Musk’s AI startup xAI has shouldered it with a controversial albatross that also happens to be a gigantic money hole.
Waning enthusiasm for SpaceX’s stock this week could serve as a reality check for those buying into Musk’s grandiose visions. Many analysts expected shares to skyrocket, with price targets that eclipsed the IPO asking price of $135 several times over.
“We got very comfortable owning this stock because we could see $200 billion of revenue in 2030,” Founder Funds in Dallas partner and portfolio manager Michael Monaghan told Bloomberg. “But literally and figuratively you need a rocket to go get those revenues.”
SpaceX bulls and Musk loyalists are now settling in for an even wilder and more drawn out ride than they had anticipated.
“We think fundamentals and SpaceX’s long-term growth potential will drive investor interest,” Arete Research’s Andrew Beale, who predicted shares to reach over $400, told Bloomberg. “Space is hard and timelines can slip with launch anomalies, technical challenges, environmental concerns and any number of other factors, so all estimates should be treated with a wide degree of caution.”
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