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There’s a brutal truth about IPOs that I’ve been discussing that most investors overlook…
And it’s playing out right now with SpaceX (SPCX).
Here’s the stat that matters: About 95% of IPOs will fall to half their IPO price within the first 18 months. Not from their opening-day high or some arbitrary technical level.
From their actual IPO price.
Now look at SPCX. The opening-day price was $150 and the IPO price was $135. Cut $135 in half and you’re looking at $67.50. That’s not a guess — it’s math applied to historical patterns.
That pattern becomes even more important when you consider SPCX’s unusually limited supply. Right now, just 4.9% of all shares are available on the open market. With such a tight float, relatively small shifts in buying or selling can produce outsized price moves.
SPCX is already down 50% from its post-IPO high. It doesn’t have far to go to reach 50% below the IPO price. There’s a 5% chance it won’t follow the pattern but I’m not betting against 95% odds.
This is something we’ve already discussed here before, so let’s discuss what’s new…
The Lockup Schedule That Changes Everything
Eventually, nearly 100% of the shares could become available as lockups expire in tranches. The first chunk becomes eligible for trading on Aug. 15 after the company’s first earnings report on Aug. 4. When shareholders who’ve been locked in for months can finally sell, that added supply may create significant downward pressure.
CEO Elon Musk’s unlock is a particularly important milestone because it marks the point when a substantial block of shares becomes available for him to act on. Even if he doesn’t sell, the possibility could affect market sentiment and increase uncertainty around the available supply.
There’s another side to that equation…
Many index funds size their holdings using a company’s float and market capitalization. As the float expands, those funds may need to buy additional shares. That forced demand could help stabilize SPCX and establish a bottom before Musk takes any action.
My Game Plan for the Drop
I still think SPCX could dip into the $60-$70 range, although investors anticipating that target may front-run the move and create a bottom closer to $75.
As SPCX dips through $100, I’ll start looking at selling puts and potentially pick up shares. That approach could generate income from elevated option premiums while positioning me to acquire shares at a lower effective price if the contracts are assigned.
SPCX’s beta of five point six after only one month of trading shows how extreme the volatility has been. That creates risk but it also produces unusually rich option premiums for a company this large.
Before the close yesterday with SPCX trading for around $117, selling a $100 strike put expiring two weeks out netted a premium of $4.30.
That’s a 100% annualized return going 15% out of the money — this premium is jacked up because of the elevated volatility around earnings, but that’s a nice chunk of change.
The 18-month window is defined, the lockup schedule is public and the historical pattern is compelling. This isn’t about hoping for a crash — it’s about understanding how IPO supply dynamics typically unfold and preparing to act when the setup reaches my preferred entry zone.
Jeffry Turnmire
Jeffry Turnmire Trading
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I’m just a regular dude in Knoxville, Tennessee: a husband, father, civil engineer, urban farmer, maker and trader.
I’ve been at this trading thing with real money for 20-plus years, and started paper trading over 35 years ago. I have a knack for making some epic predictions that just may very well come true. Why share them? Because I like helping other people — it’s the Eagle Scout in me.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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