Space Exploration Technologies Corp. SPCX-Q officially joined the Nasdaq-100 index on Monday at market close, prompting investment funds that track the tech-laden index to buy in. But the latest index inclusion didn’t offer an anticipated boost to SpaceX shares, which slid to their lowest-ever closing price Tuesday.
SpaceX’s rapid entry into the Nasdaq-100 was the last in a recent flurry of additions to major indexes after the company’s shares started trading publicly June 12.
The stock was granted fast-entry into major indexes such as the Vanguard U.S. Total Market Index and MSCI Global Index over the last 15 trading days as index providers amended their inclusion requirements – with the notable exception of the S&P 500 – ahead of a projected wave of mega-cap IPOs.
Since SpaceX’s record-breaking initial public offering – at which the company offered 4 per cent of its shares to the public at US$135 a piece – the stock performance has been highly volatile. SpaceX shares slipped 6.8 per cent on Tuesday to US$149.47, more than 25-per-cent below their June 16 closing high of US$201.80.
Brokerages kicked off their coverage of the company Tuesday, where many of Wall Street’s largest banks issued buy-equivalent ratings and valued the stock far north of its current price.
Joining the major Nasdaq-100 did not offer the boost companies often hope to see.
More than 75 million SpaceX shares traded at Monday’s closing auction as funds tracking the index purchased shares at the closing price of US$160.42. Yet the stock opened on Tuesday morning at US$158.92.
With every index inclusion comes more passive demand for the stock, according to Peter Haynes, head of index and market structure research at TD Securities, as funds tracking major benchmarks buy the stock to match the index’s new weight.
But a boost in the share price from increased index demand “is far from a sure thing in general,” according to Alex Perel, head of ETF services at Scotiabank Global Banking and Markets.
This is because index inclusion events are widely anticipated and closely tracked by the investment community, often prompting hedge funds and other market players to trade around event’s volatility.
“To the extent that [participants] had shares that they wanted to sell, this would be an opportunity to,” Mr. Perel said.
Mr. Haynes stressed that the market’s reaction to index inclusion events are unpredictable.
However, since Monday marked the final index inclusion event in the foreseeable future, he said any pressures the price had been facing from index demand will now weaken.
Brokerages line up bullish calls as SpaceX enters Nasdaq-100
“There is no natural demand from the index community at this point, so the stock can trade normally.”
While the price of SpaceX shares weren’t lifted by the index inclusion, shares slid Tuesday and the Nasdaq-100 lost more than 1.75 per cent.
The declines were part of a broader tech selloff fuelled by concerns of heavy AI spending and escalating conflict in the Middle East, according to Michael Dehal, senior portfolio manager at Dehal Investment Partners of Raymond James Ltd.
Samsung shares fell nearly 7 per cent in South Korea – where the memory chip giant trades – as concerns about spending and demand overshadowed record second-quarter earnings, sparking the global selloff in semiconductors.
“It’s a classic ‘buy the rumour, sell the event’ story with Samsung. It was priced for perfection and had a big run up,” Mr. Dehal said in an interview.
“You’re seeing that spill over into other memory names and AI names.”
The broader tech-sector selloff affecting SpaceX was also triggered by rising bond yields and a bump in oil prices.
“Since the war started, every time oil goes up, bond yields go up, tech stocks go down,” Mr. Dehal said, also noting the reverse had been seen. “So it’s kind of been like a yo-yo for the last couple months, and that’s moreso SpaceX’s price action today”
Crude benchmarks surged more than 2 per cent Tuesday, following Iranian attacks on ships in the Strait of Hormuz early Tuesday morning and continued to rally after the U.S. revoked Iran’s licence to sell its oil.
Experts said the next catalyst for SpaceX’s stock will arrive once the company starts to report earnings and insider shares unlock over the next few months. Currently, SpaceX represents just more than 1 per cent of the Nasdaq-100.
“The index community is watching the release of the lockup shares because as those shares get released, index weightings of SpaceX will go up,” Mr. Haynes said.