SpaceX Corp (NASDAQ:SPCX) did almost everything investors had asked of it in its first quarterly report as a public company, and the shares fell anyway.
Revenue of $7.8 billion for the April to June quarter came in ahead of the $6.81 billion analysts had pencilled in, and adjusted earnings before interest, tax, depreciation and amortisation of $3.5 billion beat a $2 billion consensus.
The net loss of $541 million was a fraction of the $1.9 billion forecast and a marked improvement on the $4.3 billion lost in the first quarter.
The shares still fell 7.5% in after-hours trading.
The price of growth
The figure that unsettled investors was capital expenditure. SpaceX spent $18.4 billion in the quarter against forecasts of roughly $13 billion, with close to $16 billion of it directed at xAI, the artificial intelligence business Elon Musk folded into the group before listing.
That follows more than $10 billion in the first quarter, and analysts now expect the full-year total to pass $45 billion.
Revenue from the AI segment grew 247%, while Starlink, the satellite broadband arm and the group's only profitable division, grew 66%.
The problem is that the spending is running well ahead of the returns, and investors want evidence that the gap eventually closes.
Musk's guidance on the analyst call did little to settle that argument, given he pulled forward his target for $1 trillion in annual revenue to 2030 from 2031 and floated 2029 as possible, against FactSet estimates of about $207 billion for that year.
Overhang issue
The bigger issue arrives on Thursday. Employees and early investors become free to sell 911.5 million shares, equivalent to 12% of the company and more than the 640 million currently traded.
That tranche is worth roughly $116 billion, with a further 455.8 million shares capable of being released under certain conditions.
The structure is unusual, because SpaceX and its banks staggered the releases across nearly a year rather than letting billions of shares free on a single date.
Another 455.8 million are due around 20 August, with further expiries running through September and beyond.
Shares held by Musk and a small group of insiders stay locked until the middle of 2027.
An overhang of this kind is corrosive because the price the market has been setting since June was struck on a very small free float, and that float is about to triple.
Not optional
Supply is only half of it, since much of the selling is not optional.
Many holders need to sell, having already pledged stock against houses and other purchases, which puts a floor under the volume of shares heading to market regardless of price.
Short sellers have been positioning ahead of the date in anticipation.
Membership of the Nasdaq 100 cuts both ways here, because index funds must buy more stock as the float expands, but providers typically only review float quarterly, so the mechanical demand arrives long after the supply.
There are mitigating arguments, and not all unlocked shares will reach the market, while short sellers covering positions will provide some support.
But the sequencing is the point, since each expiry hands the market a fresh test of appetite before the previous one has been digested.
The stock is already down 49% from its June high of $225.64, and well below its $135 offer price.
