SpaceX Short Sellers Face Squeeze Risk as IPO Lock-Up Expires

SpaceX investors and employees will be free to sell shares starting Thursday, when the company’s IPO lock-up period expires, but some analysts warn the event could trigger a short squeeze instead of the expected selloff.

According to Semafor, more than one-third of SpaceX’s shares are currently sold short, according to S3 Partners, as many traders bet the stock will fall after early shareholders gain the ability to sell.

However, several factors could limit selling pressure. SpaceX shares are already down about 40% from their IPO price, making some early investors less willing to sell at current levels. Others have reportedly locked in gains through derivatives and may continue holding their shares, particularly long-term supporters of Elon Musk.

If fewer shares than expected reach the market, short sellers may be forced to buy back stock to close their positions, creating a short squeeze that could push the share price sharply higher. The risk is amplified by typically lower trading volumes during August, when market liquidity is thinner.

Investor takeaway: The expiry of the lock-up period is expected to bring volatility to SpaceX shares. Investors will be watching whether selling pressure materialises or whether limited supply forces short sellers to cover their positions.