SpaceX Short Sellers Nearly 'Out of Ammunition' as Stock Surges Over 40% from August Low

SpaceX (SPCX-US) shares have rebounded strongly from recent lows. Data shows the short interest ratio—short positions as a percentage of tradable shares—has dropped sharply from last week's peak of 34% to about 11%, with short covering contributing to the recent price surge.

According to financial data firm S3 Partners, this significant decline stems from two main factors: bearish investors buying back shares to close their short positions, and a substantial increase in the number of shares available for trading following the expiration of the initial lock-up period, which diluted the short interest ratio.

Ihor Dusaniwsky, Managing Director of Predictive Analytics at S3 Partners, stated that investors looking to short SpaceX are nearly 'out of ammunition,' as the capital available for any single trade is ultimately limited.

On Wednesday (the 12th), SpaceX (SPCX-US) closed up 9.65% at $146.15 per share, an 8.26% premium over its $135 IPO price, and approximately 41% higher than its August 3rd low. The stock briefly rose nearly 11% intraday, reaching around $149.

Short covering could further amplify this rally. To exit a short position, investors must buy back the borrowed shares they previously sold. When the stock price is already rising, this forced buying can push prices even higher.

SpaceX’s stock has been highly volatile since its IPO. After the company released its first post-listing financial report showing capital expenditures more than double its revenue, concerns mounted over the massive funding required for its rocket, satellite, and other space programs, leading to a sharp sell-off.

This downturn attracted a wave of new short sellers. Due to the initially limited float, the short interest ratio surged to an unusually high 34%.

However, the market structure changed significantly last Thursday when SpaceX’s initial lock-up period expired, unlocking over 911 million shares for trading—approximately 7% of the company’s outstanding shares, exceeding the 639 million shares issued during the IPO.

With more shares now tradable, the short interest ratio naturally declines even if the absolute number of shorted shares remains unchanged. S3 Partners noted that beyond this mathematical dilution effect, actual short covering by some investors was also a key reason for the rapid drop in the ratio.

More SpaceX shares will continue to be unlocked in the coming weeks. According to the public prospectus, another 319 million shares may be released on August 20, around 700 million in September, and a similar volume in October.

This new wave of supply could allow employees and early investors greater opportunities to sell their holdings, potentially increasing volatility and downward pressure on the stock. Conversely, the expanded float will make borrowing shares easier. If market sentiment turns bearish again, establishing new short positions will become significantly simpler.