After $2-trillion debut, options open tomorrow for Elon Musk’s SpaceX – What that means

When does the share sale begin?

Restrictions on insider share sales are expected to remain in place for about six months following the IPO. After that period, eligible shareholders will be allowed to sell their holdings.

To avoid a flood of shares entering the market at once, SpaceX is expected to follow a gradual release process. The gradual share release is designed to reduce volatility and maintain orderly trading after the IPO. Some brokerage firms have also imposed temporary holding periods on shares acquired during the initial trading sessions.

Greenshoe option in focus

SpaceX’s IPO includes an option for greenshoe which is a standard US stock market listing. The greenshoe options helps to stabalise a stock during its early trading period. Under SpaceX’s greenshoe option, Morgan Stanley has the option to purchase an additional 15 percent of the offering at the IPO price of $135 per share for up to 30 days. The amount will be roughly around 83 million additional shares on top of the 555.6 million shared already sold in the offering.

The major test

A key event that investors will be closely watching is SpaceX’s first earning report as a public company.

While the company has not announced a date for its next earnings release, it is expected in the coming months and could reignite debate over whether SpaceX’s financial performance its $2 trillion valuation.

Last year, the company reported a loss of $4.94 billion on revenue of $18.7 billion.

Index inclusion

SpaceX is also expected to become eligible for inclusion in major stock indexes, including the Nasdaq 100, certain MSCI and Russell indexes. In the new index tracking funds will be forced to buy the stock, potentially boosting demand and supporting prices.

(With inputs from Reuters)