SpaceX (SPCX) stock is tumbling further this morning after the firm’s 13th Starship test flight was aborted right before liftoff as several engines failed to start properly.
The development adds fuel to the bearish fire that has already assembled a $25 billion wall against billionaire Elon Musk’s space infrastructure and artificial intelligence (AI) behemoth.
As of writing, around 185 million SPCX shares are sold short, meaning skeptics now control nearly 29% of the giant’s publicly tradeable float, a huge jump from about 7% only just a few weeks ago.
SpaceX stock is currently hovering around $124 – about 8% below its initial public offering (IPO) price.
Why are short sellers piling up against SpaceX stock?
Short sellers are piling against SPCX stock primarily because of its astronomical valuation, heavy corporate debt, and an imminent wave of share unlocking.
SpaceX is still going for about 90x sales, facing continuous pressure to deliver flawless execution, which the test flight failure today reinforces is hard to achieve for a space infrastructure company.
The recent $25 billion bond issuance to finance “capital-intensive” AI infrastructure and ongoing rocket development has sparked heated debates over long-term profitability timelines.
Crucially, because the initial IPO float comprised only 5% of the total 13 billion shares outstanding, a huge portion of insider equity is currently restricted.
Bears anticipate that as major tranches open up, beginning with an 11% unlock tied to Q2 earnings, the sudden influx of tradable stock will dilute buyers and further depress share prices.
What rising short interest really means for SPCX shares
For retail and institutional investors, this rising wave of short-selling signals an era of intense near-term volatility and a fundamental shift in market psychology.
This bearish sentiment suggests Wall Street’s post-IPO euphoria has officially unwound.
Market participants are now moving away from speculative excitement and demanding concrete financial accountability, especially after the firm’s multi-billion dollar losses last year.
With nearly a third of the float heavily shorted, SpaceX shares are highly sensitive to both technical and fundamental developments.
Simply put, the asset is poised for explosive swings; any overwhelmingly positive catalyst – such as a successful Starship launch sequence or a surprise earnings beat – could force short sellers to rapidly cover their positions, triggering an intense short squeeze.
How Wall Street recommends playing SpaceX at current price?
Despite the rising short interest and the Starship test flight failure on July 17th, Wall Street remains bullish as ever on what the future holds for SPCX shares.
Of the 33 analysts who currently cover the space infrastructure and AI giant, at least 24 recommend buying it at the current price.
More importantly, the consensus price objective on SpaceX sits at about $235 currently, indicating potential for a nearly 90% rally over the next 12 months.
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