An analysis said SpaceX, set to list on the U.S. stock market on the 12th, could emerge as a "supply-and-demand black hole" for the Nasdaq in the future. However, rather than immediately after the listing, its impact on flows is expected to materialize in earnest in the second half of this year, when inclusion in the Nasdaq 100 and the end of the lockup period coincide.
Lee Kyung-soo of Hana Securities said in a report on the 10th that "SpaceX could create supply-and-demand effects similar to LG Energy Solution, which went public in early 2022."
SpaceX's initial free float is expected to be about 4.2% of total shares. That is far lower than the initial free-float ratio of Facebook (now Meta), which listed in 2012 at 15.4%, and is unusually small even among large initial public offerings (IPOs).
In general, when the initial free float is small and a future lockup expiration is scheduled, concerns about an overhang (potential selling volume) arise. In fact, Facebook's share price was weak around each lockup expiration after its listing, and it fell about 50% from the offer price during the three months after the IPO.
However, Hana Securities projected that for SpaceX, capital inflows tied to index inclusion would offset a significant portion of the overhang burden starting right after the listing.
Under the Nasdaq 100 fast-track system established this year, SpaceX is expected to be added to the Nasdaq 100 in early July, about a month after its listing. Separately, it is also scheduled to be included in the Russell 1000 and Vanguard CRSP indexes immediately after the listing.
Lee said, "Combining the effects of inclusion in the Nasdaq 100, Russell 1000, and CRSP indexes, passive inflows of about $25 billion are expected by early July."
In particular, it is notable that for SpaceX the period from listing to inclusion in the Nasdaq 100 is only about a month. Compared with Facebook, which was added to the Nasdaq 100 about seven months after its listing, the pace is much faster.
Lee said, "For SpaceX, the period between its listing and Nasdaq 100 inclusion is only one-seventh that of Facebook, leaving little time for overhang concerns to be priced in," adding, "Expectations for index-driven demand are likely to overwhelm the overhang burden."
Hana Securities singled out August and November as months to watch. That is because passive inflows tied to a higher weighting in the Nasdaq 100 could coincide with an increase in free float as the lockup expires.
Lee explained, "If front-running demand pushes the stock sharply higher, proportional inflows can be expected," calling it "the window when the black-hole effect on supply and demand could be strongest."
Lee added, "This will be very similar to the case in 2022 when LG Energy Solution, right after its listing, was included in the Morgan Stanley Capital International (MSCI) index and the KOSPI 200, siphoning liquidity from the domestic stock market."