(June 23): SpaceX shares turned positive in pre-market trading, erasing an initial decline that would have represented a fourth straight day of losses for the Elon Musk-led rocket and satellite company.
The stock rose 1.3% before the bell, having previously dropped about 3% amid a broad-based selloff in technology and other high-momentum stocks. That decline had put it on track to slip below US$2 trillion in market capitalisation.
The elevated volatility in the stock comes as the company gears up to sell investment-grade bonds for the first time to fund a massive borrowing spree for its artificial-intelligence ambitions.
After pulling off a record US$75 billion IPO last week and riding an initial surge, enthusiasm has begun to temper against the stock that’s been at the forefront of a retail frenzy in speculative space and artficial intelligence (AI) trades. Worries are mounting on Wall Street that the AI bets are becoming overheated and South Korean shares plunged 10% on Tuesday in a rout driven by tumbling chipmakers.
In total, SpaceX has shed more than US$600 billion in value after falling for three straight sessions. Monday’s 16% plunge in the stock erased about US$400 billion, marking the second-largest one-day loss on record. Only Nvidia Corp’s roughly US$590 billion plunge that happened last year is bigger.
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SpaceX, officially named Space Exploration Technologies Corp, is seeking to raise at least US$20 billion from the bond offering, making it the latest megacap technology company to tap investors for its AI expansion.
The planned note issue is highly unusual in the high-grade bond market, where investors typically lend money to established companies that make cars or sell life insurance. SpaceX hasn’t been profitable, and according to a note last week from S&P Global Ratings is expected to burn cash through 2029.
Separately, SpaceX also inked a multibillion-dollar agreement to provide computing resources to Reflection AI, an AI startup, the company said on Monday.
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Even with recent losses, SpaceX shares are still up roughly 10% from its US$135 initial public offering price.
Also on Tuesday, Susquehanna Financial started coverage on the stock with a neutral rating and US$170 price target. That target represents upside of about 10% from the stock’s Monday close.
Currently, six of the firms tracked by Bloomberg recommend buying the stock, while two including Susquehanna have hold-equivalent ratings. There is one sell rating. The average price target stands at nearly US$227, suggesting return potential of about 47% off Monday’s close.
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