Space Exploration Technologies Corp (NASDAQ:SPCX) saw its stock price decline sharply on Wednesday, closing at $157.54, down 7.8% for the session. Premarket trading on Thursday indicated further weakness, with shares quoted at $155.84 as of 4:13 a.m. EDT, according to The Wall Street Journal. The stock now trades approximately 30% below its 52-week high of $225.64 but remains about 7% above its low of $147.11.
The heightened volatility comes as short interest in the space company has surged dramatically. According to data from Ortex, short interest climbed to 196 million shares, representing roughly 31% of the free float. This marks a significant increase from just 83 million shares, or 13% of the free float, a week earlier. Ortex co-founder Peter Hillerberg described the situation as extraordinary for a stock that has been publicly traded for less than a month, calling the short trade a roller coaster for bears.
The short squeeze narrative is drawing considerable attention, particularly with SpaceX set to join the Nasdaq-100 index on July 7. J.P. Morgan (NYSE:JPM) estimates that the index inclusion will trigger approximately $4.3 billion in passive inflows, equivalent to about 27.3 million shares at Wednesday's close. However, this represents only about 14% of the current short interest, or roughly a quarter of Wednesday's trading volume of 109.3 million shares. The math suggests that the index-driven buying alone may not be sufficient to fully unwind the substantial short position.
The broader market context adds another layer of complexity. U.S. stock index futures were mostly flat on Thursday morning ahead of the June payrolls report, with Nasdaq 100 futures slipping 0.24% at 5:00 a.m. ET. Additionally, the Nasdaq will be closed on Friday, July 3, in observance of Independence Day, which could reduce liquidity and amplify price swings.
SpaceX's financials remain a point of contention. The company reported a net loss of $4.9 billion last year, according to Reuters. Despite this, the stock trades about 17% above its $135 IPO price, though the bulk of trading activity now revolves around the float. S&P Global (NYSE:SPGI) has indicated it will delay adding SpaceX to major indexes like the S&P 500 for at least 12 months.
Analyst opinions are divided. Wedbush analyst Dan Ives initiated coverage on the stock with an outperform rating and a $190 price target, arguing that SpaceX is well-positioned to become a major hyperscaler across connectivity, launch, and AI infrastructure. Conversely, Morningstar (NASDAQ:MORN) chief equity strategist Michael Field expressed caution, stating that while there is significant demand driving the fast-track index addition, the stock appears overvalued.
The debate around SpaceX's valuation extends beyond its core rocket business. Bears argue that AI and telecom ventures need to justify the company's $2 trillion-plus market cap. This was highlighted by a recent Wall Street Journal report claiming SpaceX showed investors a prototype AI phone running xAI technology and Qualcomm Inc (NASDAQ:QCOM) Snapdragon chips. Elon Musk dismissed the report as utterly false on his social media platform X.
As the market awaits the Nasdaq-100 inclusion next week, the interplay between short sellers and passive inflows will be closely watched. The stock's performance in the coming days may provide clues about whether the short squeeze materializes or if the bears maintain their grip.
