Is It a Good Time to Short SPCX Stock

It has been four months since SPCX stock began trading, putting Space Exploration Technologies Corp. on the public market at a valuation grounded, to put it mildly, in elevated expectations about the future.

That, by itself, is not uncommon for a newly listed company. What is uncommon is for a relatively new public company that has yet to establish consistent profitability to command such an enormous valuation.

With a market capitalization of approximately $1.9 trillion, SpaceX stock is currently the sixth-largest publicly traded US company.

First, let’s start with SPCX stock valuation

According to earnings estimates cited by Seeking Alpha, SPCX is expected to earn $3 per share over the next 12 months. Using a share price of approximately $160, that translates into a forward P/E ratio of roughly 53.

Just as a reference, the S&P 500 trades at a forward P/E of 20.47, according to State Street Global Advisors, and NVDA trades at a forward P/E of 17.90, according to seekingalpha.com.

Yes, SPCX stock appears to be one of the most expensive on the market, particularly considering its enormous market capitalization.

Of course, forward P/E ratios are not a perfect way to value a rapidly growing company. Earnings can increase dramatically as a business scales. However, at these multiples, investors are already paying for a great deal of future success.

Second, we are certainly not alone in our skepticism about SPCX stock

According to Finviz, SpaceX stock is the most heavily shorted of the publicly traded mega caps, companies with a market capitalization above $1 trillion.

As of September 30, approximately 181 million shares were sold short, representing around 7% of the float reported for that date.

For comparison, Tesla’s short interest has been considerably lower as a percentage of its float.

Courtesy of finviz.com: Daily chart of SPCX and its short interest

There is something particularly interesting about the chart.

The absolute number of SPCX shares sold short has remained relatively stable since August, despite a substantial increase in the publicly tradable float following the expiration of post-IPO restrictions.

In other words, the decline in short interest as a percentage of float does not necessarily mean that short sellers have materially reduced their positions. Much of the change reflects the larger denominator.

We would not interpret short interest alone as proof that the stock is overvalued. After all, heavily shorted stocks can be extremely dangerous for short sellers. [Internal link on “short sellers” → your margin trading / short selling page]

Nevertheless, it is noteworthy that substantial bearish positioning has persisted despite the changes in float.

Third, efforts to merge TSLA and SPCX will most likely result in SPCX paying a premium for TSLA

Allow us to explain. Mr. Musk owns about 80% of the voting rights of SPCX and roughly 20% of those in TSLA. A merger of the two companies, now officially being considered, may result in savings. However, if successful, it will certainly result in Mr. Musk having majority voting rights in the potential new entity. As such, SPCX would probably have to pay a premium to the current TSLA valuation to entice TSLA shareholders to vote in favor.

In general, large, complicated conglomerates and holding companies trade at a discount rather than a premium. SPCX is a complicated entity even at present, and adding TSLA to it would make valuing SPCX stock an extremely difficult proposition, even for professionals.

Fourth, and perhaps most importantly, another enormous IPO may be approaching: Anthropic

Anthropic, the developer of the Claude AI models, is reportedly preparing for a public listing, with valuations as high as $2 trillion having been discussed. [Internal link on “public listing” → your AI IPOs article]

That would place it in the same market-capitalization category as SPCX.

Anthropic also competes with SPCX’s xAI business in the market for advanced artificial intelligence. More broadly, the two companies compete for investors willing to allocate substantial capital to the future of AI.

Recent reports suggest that Anthropic’s valuation could ultimately be lower than the most ambitious expectations. However, the final IPO valuation remains uncertain.

Why does this matter for SPCX stock?

Because investors have finite capital.

A major new listing can attract funds that might otherwise have been allocated to existing technology companies. This is particularly relevant when valuations are elevated and investors are becoming more selective about where they deploy capital.

Of course, a successful Anthropic IPO could also strengthen enthusiasm for AI-related stocks. We should not assume that additional supply automatically means lower prices.

However, we believe that the combination of elevated valuations, increasing share availability and competition for investor capital creates an unfavorable environment for SPCX.

Conclusion: should you short SPCX stock?

SPCX is an extraordinary company operating in several industries with enormous long-term potential.

That does not necessarily make it an attractive stock at any price.

At a valuation of over $2 trillion, investors are already discounting exceptional future growth and profitability. Also, the potential for a merger between TSLA and SPCX is certainly not a positive development for SPCX shareholders.

Meanwhile, short interest remains substantial, the tradable float has increased, and another potentially enormous AI-related IPO is approaching.

We believe these developments make SPCX stock an interesting short candidate.

The principal risks are obvious: the company could exceed expectations, the AI investment boom could continue, and a heavily shorted stock can rise sharply even when its valuation appears difficult to justify.

Nevertheless, at current prices, we believe a short position in SPCX stock deserves serious consideration, provided investors are prepared to manage the substantial risks involved.

Disclaimer