Why SpaceX Stock Just Gained 15.8%
Key Points
SpaceX (SPCX) stock surged Friday after a major post-IPO lockup expiration failed to trigger the sell-off investors had feared.
The company announced a $16.8 billion joint investment with Tesla in a massive Texas semiconductor facility called Terafab, creating at least 3,000 jobs.
Despite the bullish news, SpaceX's cash burn and valuation concerns may give long-term investors reason to pause.
Space Exploration Technologies Corp. (NASDAQ: SPCX) stock rocketed 15.8% higher on Friday while the S&P 500 and the Nasdaq Composite jumped 0.6% and 1.2%, respectively.
Shares of Elon Musk's rocket company rose after a post-IPO lock-up expiration failed to drag the stock down. At the same time, the announcement of a major project in Texas helped buoy the stock price.
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Why SpaceX stock jumped after the lockup expired
On Thursday, 911.5 million shares became eligible to trade as the first tranche of the lockup expired -- the stretch after an initial public offering (IPO) when insiders and early backers are barred from selling. That more than doubled the stock available to public markets, and investors were nervous the share price would tank as early investors and employees rushed to sell part of their stakes.
Image source: Getty Images.
The fact that did not come to pass was taken by the market as a sort of endorsement from company insiders.
It helped that on the same day, SpaceX announced, alongside Tesla, a $16.8 billion investment in Terafab. The first phase will see a 100-million-square-foot semiconductor complex constructed in Texas, providing at least 3,000 jobs.
Why I'm still staying away from SpaceX stock
Despite the positive news, I would still stay away from SpaceX stock. While the company's latest earnings showed huge revenue growth, it is still burning cash at an alarming rate, and that isn't likely to change meaningfully for years. It is still seriously overvalued for my money.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.