Bearish momentum builds on SpaceX as short interest climbs to 13% of float

Ortex Technologies, an analytics business, reports that short sellers are increasing their bets that Elon Musk’s SpaceX would continue to decrease after the company’s share price dropped from the highs it attained soon after going public on June 12.

The sale took place during a challenging period for the market as a whole.

The Nasdaq 100 was on track to lose more than $1 trillion in value on Tuesday as key IT businesses and semiconductor stocks declined.

SpaceX’s market value fell below $2 trillion for the first time since it began trading in the US.

Over the past three trading days, the business, which is anticipated to be included in the Nasdaq 100, has lost approximately $600 billion.

It would close with a market value of $1.95 trillion if Tuesday’s losses continued.

After peaking at $225.64 a few days after its launch, the stock is already down nearly 30%. Short sellers have been enticed into this downturn, which is part of a broader market decline, faster than many had predicted.

Data from S3 Partners indicates that roughly 40 million SpaceX shares are currently held in short positions, representing about 5%–7% of the company’s publicly tradable shares.

Recent figures suggest bearish bets are growing rapidly.

Ortex reports that short interest has climbed from 8% in the prior trading session to 13%, reflecting a sharp increase in the proportion of publicly available shares that have been sold short.

“A jump like this is a clear sign that a growing number of traders are positioning for the price to fall sharply,” stated Peter Hillerberg, co-founder of Ortex.

Borrowing the shares is getting easier

Traders are increasing their bets against the stock because it has become easier and cheaper to borrow shares for short selling.

“Shares are becoming more accessible,” said Sam Pierson, head of research at S3 Partners.

He noted that short sellers were paying about 0.60% annually to borrow shares.

While that is higher than the roughly 0.30% charged for the easiest-to-borrow stocks, it still suggests there is plenty of share supply available and fewer concerns about finding stock to short.

Ortex numbers, which demonstrated that the cost of borrowing is still low at roughly 1% and balances the supply of shares to lend against the desire to short a company, supported this.

At the start of trading, it hit 14%. There is still a lot of stock available for lending, according to Ortex, which says that utilization, or the percentage of available stock that is on loan, is currently at roughly 39%, up from the mid-30s last week.

The approach toward SpaceX is different from those of other large IT firms.

The Magnificent Seven, Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla, only have 1% to 3% of their free floats traded short.

Ortex figures show that borrowing costs for those names are between 0.25% and 0.33%.

Options traders lean bearish

The derivatives market appears to be signaling a similar outlook.

According to Reuters, investors are assigning roughly a 40% probability that SpaceX’s share price will drop below $130 by mid-September.

Steve Sosnick, chief strategist at Interactive Brokers, noted that “The options activity has gotten more balanced.”

However, in several option series expiring between July and September, the number of outstanding put options, which gain value when the stock declines, is nearly double the number of open call options.

Ultimately, speculators who anticipate a decline will probably continue to be drawn to Musk’s rockets-and-AI company due to its high price tag.

Despite the $2 trillion value making it an apparent target, a number of factors, such as Musk’s history of openly opposing short selling and significant acquisitions by institutional and individual investors, may deter short sellers.

A request for comment was not immediately answered by SpaceX.

The aggressive shorting points to a change in how the market sees the company.

Investors appear to be looking past Musk’s long-term promises and focusing more on near-term spending, treating SpaceX as a heavy industrial business rather than a light software play.