SpaceX seeing interest from short sellers, but most afraid to go against Musk

SpaceXShares’ sharp pullback from record post-IPO highs is doing little to encourage short sellers reluctant to bet against CEO Elon Musk, even though shares have lost more than a quarter of their value in just over a week.

The rocket company is down nearly 12% this week and nearly 28% from its June 16 peak, losing hundreds of billions of dollars in market value after a wild rally following its June 12 initial public offering.

However, bearish bets are under control. According to an estimate by S3 Partners, only about 40 million SpaceX shares are currently sold short; This represents roughly 5% to 7% of the company’s free float, which consists of approximately 625 million shares outstanding.

Short selling refers to a trading strategy that allows investors to bet that the price of a stock or security will fall.

Nearly 60 companies in the S&P 500 currently have short positions exceeding 7% of their float, according to FactSet, indicating that the bearish sentiment on SpaceX remains relatively moderate despite the stock’s recent decline.

More than 30 million SpaceX shares are currently available for borrowing, indicating ample liquidity in the securities lending market. Borrowing costs are also low, with annual fees below 1%, S3 said.

“SPCX has attracted active short interest, but data shows it is far from a supply-constrained short,” S3 head of research Matthew Unterman told CNBC. “The current setup looks more like normal price discovery than the classic short squeeze candidate.”

For now, many traders appear reluctant to short a company that remains one of the market’s most closely followed growth stories, with a passionate retail investor base.

Even some of Wall Street’s best-known skeptics have remained on the sidelines. Famous investor Michael Burry, who bet against the US housing market before the 2008 financial crisis, said he tried various ways to bet against SpaceX but ultimately passed.