Space Exploration Technologies Corp. (NASDAQ:SPCX) experienced a sharp decline of approximately 6% on Wednesday, closing at $160.60 in active trading. The stock traded within a range of $157.99 to $176.12, with volume reaching nearly 59.9 million shares. This downturn comes as short interest in the company has surged to 196 million shares, representing about 31% of the free float, according to Ortex data cited by Reuters.
The mounting short position, valued at roughly $31.5 billion at current prices, is set against a backdrop of upcoming index inclusion. Nasdaq Inc. (NASDAQ:NDAQ) announced that SpaceX will join the Nasdaq-100 index before the market opens on July 7. J.P. Morgan estimates this inclusion could generate approximately $4.3 billion in passive inflows, as more than 200 products tracking the index hold over $800 billion in assets globally.
This setup creates a significant tension between short sellers and passive buyers. The short notional is about seven times the estimated passive inflow, meaning the next few trading sessions could be driven more by flow dynamics than by fundamental factors like launch cadence or Starlink subscriber growth. The passive bid of roughly 26.8 million shares at current prices represents only about 13.7% of the short interest.
Peter Hillerberg, co-founder of Ortex, described the rise in short bets as "extraordinary for a stock that has been public less than a month," adding that there is "a lot of potential fuel if it tips into a squeeze." However, the cost to borrow SpaceX shares remains low at about 1%, down from a peak of 14% at the IPO. Short sellers have incurred mark-to-market losses of about $760 million since the IPO, after being up roughly $2.5 billion on paper when the stock bottomed near $153 last week.
Wedbush analyst Dan Ives initiated coverage on SpaceX with an Outperform rating and a $190 price target, calling the company "one of the most differentiated assets within the tech market." Ives highlighted Starlink's subscriber base of about 12 million as of June 5, with average revenue per user near $66. He also noted that the Starship rocket could carry about 60 Starlink satellites per launch, compared with 27 for Falcon 9, providing an incremental driver for the broadband business. Wedbush's target implies an enterprise value of about $2.48 trillion based on fiscal 2028 estimates.
Governance concerns have also entered the index debate. SEC Commissioner Mark Uyeda told Reuters that the SEC "does not directly regulate the activities of index providers," suggesting investors with governance issues can choose alternative funds or use direct indexing. SpaceX did not immediately respond to a request for comment on the short-interest report.
The next key date for the stock is July 7, when Nasdaq-100 funds will begin holding it as an index member. This event could provide a catalyst for price action, but the large short base means the outcome remains uncertain. The stock's recent volatility reflects the market's struggle to price in both the potential for a short squeeze and the fundamental valuation debates.
