Earlier this month, Space Exploration Technologies (NASDAQ: SPCX) gave investors one of the biggest investment events ever: its initial public offering. SpaceX raised $75 billion in the largest IPO on record, and went on to bring in more than $85 billion after underwriters exercised a merger option. The IPO was heavily oversubscribed, and the stock jumped nearly 20% in its first day of trading from its IPO price of $135. So it’s clear that investors were eager to get in on this fast-growing story.
Since then, SpaceX has recouped some of its gains — but it’s still trading above its IPO price. In the coming weeks, certain events will happen, and they may cause the stock price to move. The first such event is just around the corner, on July 7. Should you buy SpaceX before then? Let’s find out.
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Why investors are buying SpaceX
We’ll start by looking at why investors are rushing to invest in SpaceX in the first place. SpaceX, as its name suggests, is a leader in rocket launches, focusing on reusable technology to reduce costs. It has completed 650 orbital launches, 85% using at least one reusable booster, and last year the company made the most launches compared to competitors. SpaceX’s next major mission for this space unit is to launch a payload into orbit on its reusable rocket, Starship.
This technology and industrial giant has two other units, communication and artificial intelligence (AI). So far, the former, called Starlink, has quadrupled subscribers to its satellite-based Internet service, and the business is generating revenue. Last year it brought in $11.4 billion on company revenues of $18 billion.
All of this is exciting, especially for growth investors. However, the AI business, while promising, may be an area of concern for some investors. This is because it requires huge investment as we can see from last year’s statistics. The capital expenditure of the AI division reached $12 billion, and that made the company loss.
Investing in Elon Musk
It is important to note that Elon Musk, the chief of Teslaand is the founder and CEO of SpaceX. Musk is known for his innovative ideas and ambitions, and some investors want to invest in a company because Musk is leading the way. That said, some investors feel very differently and shy away from companies led by Musk – they worry that his ambitions are too high and they won’t make it to the finish line or make a profit.
All of this has created a lot of interest in the SpaceX IPO — from investors eager to get in on this growth story and from long-term investors who enjoy watching from a distance.
Now, let’s consider what’s on the agenda this coming week and whether you should buy the stock early. SpaceX is about to benefit from a new fast-track program that allows shares to join the The Nasdaq-100 much faster than before.
What happened on July 7
The company will be added to the index, which represents the largest non-financial companies in Nasdaq, on July 7. According to the new conditions, the stock may be added from its 15th trading day if it is among the 40 largest Nasdaq companies by market capitalization. SpaceX, with a trillion-dollar market value, is clearly making the cut.
In the past, the company had to wait three to 14 months for it to be incorporated.
Here’s why a Nasdaq-100 addition could move SpaceX’s stock price. Funds that track the index must buy shares of any new additions to continue to track the performance of the index. This flurry of acquisition activity could send SpaceX stock up on or around the day of its addition. So, if you buy SpaceX a few days in advance, you may immediately benefit from a pop in the stock price.
Does this mean you have to buy SpaceX before July 7th? That’s not the case. These temporary movements are small and will not affect your long-term returns. (It is also important to note that SpaceX involves a certain level of risk so it is best for aggressive investors.) Finally, if you would like to invest in SpaceX, the best ideas are to buy the stock on the dip or choose an exchange-traded fund that holds shares.
Should you buy stock in Space Exploration Technologies right now?
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Adria Cimino holds positions at Tesla. The Motley Fool has positions and recommends Tesla. The Motley Fool has disclosure policy.
Should You Buy SpaceX Before July 7th? was first published by The Motley Fool
