Seems odd that they don't discuss a common reason to short a stock: you expect it to go down, without any real opinion on the business. In this case there is going to be a ton of new float fairly soon. It's a pretty safe bet that this will depress the price. So the natural trade is to sell now (short), and buy later (cover the short). That effectively moves the future price drop to "now", which is likely what we see. This is just one way (of many) in which the market factors future events into today's price, which is sort of the whole point.
Matt Levine pointed out to a likely culprit, and it indeed has nothing to do with the business outlooks.[0]
SpaceX sold only 5% of their stock in the IPO. Earliest lockups will start to [partially] expire in mid-August, bringing in further 7% of SpaceX stock to market. If you expect the market to be flooded with >2x volume of supply, you can either sell right now before the price drops even further or hold and wait for the business fundamentals catch up with pricing expectations.
I give you a common reason to short it: you had a 5% of the company float IPO, in a few months you will have 40% of the company or more on the public market . Not to mention the “special” changes to index funds etc just to keep its valuation high (some would say artificially). On top of that the valuation metric for its stock price are not earth-ish…
That’s an odd non sequitur. I’m simply describing why a lot of the short positions are not from people who have any opinion on the value of the stock. They are engaged in an almost mechanical arbitrage like trade.
People tend to imagine that all short sellers have some fundamental disagreement with the current value of the security, or are trying to manipulate to the value for some reason. It’s useful to understand there is a lot of volume that does not really care about the value debate one way or another.
I am implying that because it is true. SpaceX owns the $80B. Elon owns stock in SpaceX.
The IPO was a primary offering in which SpaceX issued new shares and received the proceeds. If Elon had personally sold shares, the prospectus would have identified him (or other selling shareholders) in a secondary offering. It doesn’t.
That could happen, but should also consider that it's often the case with lockups release that they do not inflict much change on the stock price, but only if there's already enough trading volume on the stock due to other market conditions.
you clearly over-analyze the problems !
The right question should be answered is: after the investor who participated in the spcx pre-sale, receive the lockup shares, what will they do ?
And what makes them do that ?
Under which conditions ?
On one hand, I sense that the same people who were in the shorts crowd of the Tesla 'boom or bust' Model 3 era ($TSLQQ) are now piling up against SPCX (e.g. Ed Zitron). Betting again Elon is very risky. And on the other, boy that huge valuation is scary.
The situation could be that there are two intertwined bubbles: an AI-tech-bubble and AI-financial-bubble, both at the same time and only one of them is going to really burst and affect valuations. If that happens, we can only guess the period of time it takes for the S&P 500 to recover.
Weeks is an enormous amount of time now actually. The majority of plays in what people do with stocks is actually very short term. People aren't the kind of Berkshire buy and hold-ers anymore.
If you look it up 60% of options volumes on the S&P 500 is 0 days to expiry. Literally gambling if it goes up and down this day.
Btw its not just the US that's like this. South Koreas 2x single stock ETF debacle and India's Janestreet options story are somehow even more degenerate.
And on the other hand, there's a whole movement (in niche terms, though) of people going "just add to an S&P 500 ETF for 50 years and forget about everything else".
Seems odd that they don't discuss a common reason to short a stock: you expect it to go down, without any real opinion on the business. In this case there is going to be a ton of new float fairly soon. It's a pretty safe bet that this will depress the price. So the natural trade is to sell now (short), and buy later (cover the short). That effectively moves the future price drop to "now", which is likely what we see. This is just one way (of many) in which the market factors future events into today's price, which is sort of the whole point.
> Seems odd that they don't discuss a common reason to short a stock: you expect it to go down, without any real opinion on the business.
The reverse is true for meme stocks as well. You can buy a stock because you expect it to go up without any real opinion on the business.
Though we all know the opinion on the business. Great science project, bad business.
We all know that but people will attack you with „nobody can get a payload to the orbit cheaper”. Yeah, nobody can, and there’s limited need for that.
Matt Levine pointed out to a likely culprit, and it indeed has nothing to do with the business outlooks.[0]
SpaceX sold only 5% of their stock in the IPO. Earliest lockups will start to [partially] expire in mid-August, bringing in further 7% of SpaceX stock to market. If you expect the market to be flooded with >2x volume of supply, you can either sell right now before the price drops even further or hold and wait for the business fundamentals catch up with pricing expectations.
0: https://bloom.bg/4f7pFnd
Yes, that’s what the parent comment meant by “there is going to be a ton of new float fairly soon”
I give you a common reason to short it: you had a 5% of the company float IPO, in a few months you will have 40% of the company or more on the public market . Not to mention the “special” changes to index funds etc just to keep its valuation high (some would say artificially). On top of that the valuation metric for its stock price are not earth-ish…
Not to mention that folks that are ‘locked up’ probably had a bank/hedge fund engineer hedges until they can get out
> Seems odd that they don't discuss a common reason to short a stock
this was extensively discussed BEFORE the IPO. That is why it was overpriced.
> This is just one way (of many) in which the market factors future events into today's price, which is sort of the whole point.
nope. the market transferred $80B to Elon Musk from the people that got scammed.
That’s an odd non sequitur. I’m simply describing why a lot of the short positions are not from people who have any opinion on the value of the stock. They are engaged in an almost mechanical arbitrage like trade.
People tend to imagine that all short sellers have some fundamental disagreement with the current value of the security, or are trying to manipulate to the value for some reason. It’s useful to understand there is a lot of volume that does not really care about the value debate one way or another.
Musk's shares are locked up for a year.
and? Are you implying that Elon doesn't own the 80B spacex got from the IPO?
I am implying that because it is true. SpaceX owns the $80B. Elon owns stock in SpaceX.
The IPO was a primary offering in which SpaceX issued new shares and received the proceeds. If Elon had personally sold shares, the prospectus would have identified him (or other selling shareholders) in a secondary offering. It doesn’t.
> Elon owns stock in SpaceX.
He also owns SpaceX management and its assets.
https://archive.is/uVXbr
ggwp
They expect locked up shares to hit the market in August and tank the price
They also see one of the most ridiculously overvalued stocks of all time and want to collect easy money.
Only if the market is rational
That could happen, but should also consider that it's often the case with lockups release that they do not inflict much change on the stock price, but only if there's already enough trading volume on the stock due to other market conditions.
you clearly over-analyze the problems ! The right question should be answered is: after the investor who participated in the spcx pre-sale, receive the lockup shares, what will they do ? And what makes them do that ? Under which conditions ?
[dupe]
SPCX is now Wall Street's most shorted new stock
https://news.ycombinator.com/item?id=48938001
Short sellers notch $8.7B profit as SpaceX shares dip to IPO price
https://news.ycombinator.com/item?id=48948435
On one hand, I sense that the same people who were in the shorts crowd of the Tesla 'boom or bust' Model 3 era ($TSLQQ) are now piling up against SPCX (e.g. Ed Zitron). Betting again Elon is very risky. And on the other, boy that huge valuation is scary.
The situation could be that there are two intertwined bubbles: an AI-tech-bubble and AI-financial-bubble, both at the same time and only one of them is going to really burst and affect valuations. If that happens, we can only guess the period of time it takes for the S&P 500 to recover.
"Just weeks"
Weeks is an enormous amount of time now actually. The majority of plays in what people do with stocks is actually very short term. People aren't the kind of Berkshire buy and hold-ers anymore.
If you look it up 60% of options volumes on the S&P 500 is 0 days to expiry. Literally gambling if it goes up and down this day.
Btw its not just the US that's like this. South Koreas 2x single stock ETF debacle and India's Janestreet options story are somehow even more degenerate.
And on the other hand, there's a whole movement (in niche terms, though) of people going "just add to an S&P 500 ETF for 50 years and forget about everything else".
Substitute "target date fund" for "S&P 500 ETF" and that describes most retirement accounts... Not exactly niche.
Would have been an amazing idea 10 years ago. Not sure anymore.
A lot of the short dated options are market makers and index arbs hedging.
It's about 50/50 retail to institutions.