SpaceX's lockup expiry tomorrow could trigger record insider selling: 'We're in uncharted waters'

Just days after reporting its first quarterly earnings as a public company, SpaceX now faces an even bigger test. On Thursday, its first IPO lockup period expires, allowing company insiders to sell up to roughly 911.5 million shares for the first time. Here's a look at exactly what a lockup expiration is, how it works, and what it means for investors.

SpaceX shares fell 7% on Wednesday as investors focused on the company's soaring artificial intelligence spending, overshadowing quarterly results that topped Wall Street expectations.

In SpaceX’s first earnings report as a public company on Tuesday, Elon Musk’s space firm said its capital expenditures jumped sixfold to $18.4 billion in the second quarter. This figure was ahead of analyst expectations, with the majority of the spending going toward AI.

What exactly is a lockup expiration?

Founders, employees, and early investors in a company can't legally sell their stock immediately after an initial public offering (IPO). They're restricted from doing so during a lockup period. The end of this period is called the lockup expiration.

This period usually spans between 90 and 180 days to prevent insiders from rushing to sell their shares immediately after an IPO, which can influence the stock price immensely

What is different about the SpaceX lockup expiration?

SpaceX went with an unusual lockup approach. Instead of a fixed lockup period after which all insider shares could be sold, the company designed a staggered schedule that spreads sales over multiple dates.

On Aug. 6, 2026, insiders may sell up to the first 20% of eligible shares.

The lockup agreement also included an early-release clause, allowing an additional 10% of shares to become eligible for sale if SpaceX's stock traded at least 30% above its IPO price on at least 5 of the 10 trading days leading up to its first earnings report. However, that didn't happen.

“We’ve never seen anything like it, we’ve never seen anything of this scale, we’ve never seen a lock-up being phased in this way,” Peter Singlehurst, head of the private companies team at Baillie Gifford, which first invested in Elon Musk’s company in 2018, told Bloomberg. “We’re in uncharted waters.”

Why is SpaceX's lockup expiration likely to move stock prices?

Ending restrictions on some insiders will more than double the number of shares available, to as many as 1.55 billion shares from about 639 million shares now, according to the IPO prospectus.

And some insiders might choose to sell their shares despite the shares trading below their IPO price. Most insiders are still sitting on substantial gains because they acquired their shares at much lower valuations long before the listing.

Some employees may also choose to cash out, as the lockup expiry gives them their first chance to monetise their holdings. And that could put pressure on SpaceX's stock price.

“There’s probably a reasonably good chance that this will be the biggest single increase in the supply of shares for a single company in a single day ever,” Baillie Gifford’s Singlehurst told Bloomberg. “And so what happens on that day? I don’t know.”

Should you buy the stock now?

Wall Street remains largely upbeat on the stock. More than 80% of analysts tracked by Bloomberg rate the company a buy equivalent, and their average price target of about $238 implies roughly 78% upside from current levels.

In fact, retail investors continued to pile into SpaceX shares on Wednesday, buying the dip after a sharp drop.

Mom-and-pop traders bought a net $22.7 million in SpaceX shares in the first hour of trading alone, the third-highest first-hour total in the 37 trading sessions since the company went public, according to Vanda Research data.

"This tells us that retail dip-buying has not stepped back after the earnings sell-off – they've become even more opportunistic," Vanda Research said in the note.