Elon Musk’s SpaceX looks on paper like a classic target for short sellers: lofty valuation metrics, governance questions and speculative new-business lines. But traders and analysts alike warn that the market environment and the structure of the offering will make it unusually hazardous to mount a short immediately after the initial public listing.
At an estimated price-to-revenue multiple of 56, SpaceX’s valuation sits well above most peers, even among the handful of fastest-growing technology companies. The IPO is set to value the company at $1.75 trillion and is expected to be the largest on record at $75 billion, while the public float would be less than 5% of outstanding shares. That combination - a stratospheric valuation and minimal available supply - underpins why some see the stock as overextended.
Market dynamics and demand
Despite the apparent attractiveness of a short thesis based on valuation, multiple market features argue against an immediate bearish position. Observers point to intense interest from both institutional and retail investors, and the near-certainty that major indexes will add the stock. That index inclusion could create "large natural buyers in the indexes that will almost immediately add the stock, most notably the Nasdaq 100," according to one market participant who has been openly critical of the valuation and described SpaceX as "grotesquely overvalued."
Where investor demand is strong and the supply of tradable stock is tiny, shorts face steep borrowing costs and acute difficulty sourcing shares to borrow. Those conditions can amplify losses if the market moves against a short position, especially in a prolonged bull market.
Views from market operators and analytics providers
Gabriel Shahin, chief executive of a Los Angeles wealth firm that has allowed its clients to buy SpaceX shares on private markets, cautions that the IPO is "an extremely risky short play." He said bullish interest, including from retail participants, reduces the pool of potential safe short candidates.
Peter Hillerberg, co-founder of a provider of stock lending and short interest analytics, highlighted factors that typically draw short sellers - high-profile listings, broad retail and institutional interest, and polarized valuation views - calling them "normally ingredients that can create a broad spread of opinion, which is often where short sellers become interested." Yet he also stressed it is too early to judge actual demand.
Morningstar analysts pointed to elements that could attract skeptics, noting the company’s valuation exceeds most other mega-cap firms and that the economics around ventures such as xAI and orbital data centers remain uncertain.
Timing, float mechanics and borrowing constraints
One practical constraint for short sellers is the immediate scarcity of borrowable shares following the IPO. Though many newly public companies subject insiders to roughly six months of restrictions on sales, SpaceX plans a phased release of restricted shares and has created exceptions for some participants. That structure, coupled with a public float under 5%, will likely keep borrowing costs high and availability limited in the early trading days.
Mark Spiegel of Stanphyl Capital Partners, a long-time critic of Tesla and of SpaceX’s valuation, said he might consider a short position only after the so-called "unlock dates," when more shares become available for borrowing. "Very few people will short an IPO right away," he said, pointing to the relative difficulty and expense of establishing a borrow in the immediate aftermath of a listing.
The Musk factor and the history of short-seller losses
Shorting companies linked to Musk has historically been costly. S3 Partners reports that Tesla short sellers have incurred about $27 billion in losses since June 2021 when combining directional and index-hedge bets related to Tesla’s index inclusion. Over the past decade, Tesla shares rose more than 2,500%, underscoring the pain that can come from prolonged upward moves.
Sam Pierson, director of research at S3 Partners, summed up the sentiment among many who have endured those campaigns: "If you think back the experience of all of that was pretty unpleasant." Musk has also taken a combative approach with critics, at times taunting short sellers by selling red satin shorts and sending a box of shorts to one prominent skeptic. In August 2018, his "funding secured" tweet about a possible $420-per-share take-private of Tesla prompted a sharp price rise and inflicted roughly $1.3 billion in mark-to-market losses on short positions.
Broader context for short sellers
Short sellers as a group have faced adverse conditions over the last decade because of an extended bull market, with the challenges becoming even more acute during episodes of retail-driven rallies such as the meme-stock mania in 2021. The Goldman Sachs Most Shorted Rolling Index, an equal-weighted basket of the 50 highest short-interest names in the Russell 3000 Index, is up 29% this year and is on pace for a fourth straight year of gains, reflecting the difficulties confronting bearish strategies.
The activist short seller model also suffered a setback after the fraud conviction of a prominent investor, a development that some say could chill aggressive short campaigns. Given these headwinds, even investors who are skeptical of valuations may opt to avoid the added friction of shorting a high-profile new issue like SpaceX. As one analytics co-founder said, "As a short seller you want to make a case that the stock has reached a level that’s untenable and that’s much easier to do with trading history."
Relative opportunity set
Market participants also note that with equities broadly trading at elevated levels and numerous high-flying names available to target, SpaceX may not represent the best short opportunity even if it stumbles after listing. "If SpaceX pops 100% on its IPO, is that still the best short out there in a market where you’ve had absolute parabolic activity across the board?" asked a head of market risk at a clearing and custody platform. "I just don’t think it is."
Bottom line
SpaceX combines attributes that, on valuation and nascent business lines, make it a plausible short candidate. Yet mechanics of the offering - a minuscule public float, staged releases of restricted shares, robust demand from index funds and retail investors - together with the track record of costly short trades tied to Musk-run companies, lead many market participants to advise caution. For now, most expect bearish investors to wait for broader availability of shares before pressing a short position.