SpaceX vaults past Amazon’s market value as options listing fuels surge

Ryan Bushell, CEO & portfolio manager at Newhaven Asset Management, joins BNN Bloomberg to discuss the outlook on the markets.

SpaceX roared past Amazon’s market valuation on Tuesday and briefly topped that of Microsoft, rapidly scaling the list of the world’s most valuable companies on a topsy-turvy trading day fueled by frenzied action in the firm’s newly listed option contracts.

SpaceX shares were up 11 per cent at $213.16, giving Elon Musk’s company a market value of roughly $2.8 trillion — nearly $1 trillion more than its value when it sold its record initial public offering last week.

Shares have surged as investors bet on Musk’s sprawling empire that spans rockets to AI, even though it carries a valuation far greater than the other trillion-dollar behemoths in the U.S. equity market. The stock is expected to enjoy additional demand in coming weeks as it joins major indexes.

“It’s a $2.5 trillion company, but it certainly feels like one of those meme stocks, the way it’s trading,” said Joe Saluzzi, co-head of equity trading at Themis Trading.

“We’ve seen momentum in the past; they just tend to run and you have to be very, very careful with these types of names.”

A big driver of Tuesday’s gains was the launch of options in SpaceX stock, which confer the right, though not the obligation, to buy or sell the shares at a certain price by a stated date. They are often used by traders seeking to cash in on rising interest in a stock or to wager that shares will rise or fall quickly.

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More than 500,000 SpaceX options contracts changed hands within the first hour of trading and more than a million by early afternoon, according to Trade Alert data. SpaceX’s heavily bullish options trading volume likely helped lift the stock early in the session, said Brent Kochuba, founder of options analytics service SpotGamma.

A surge of options volume can at times cause an underlying stock to also swing as options dealers, who facilitate trading by taking the other side of options trades, buy and sell shares to square their own risk.

“If you’re a market maker, you can’t hedge SpaceX with anything else other than SpaceX,” he said.

VOLUME SURGE

Trading volume in SpaceX shares was enormous, with turnover in SpaceX shares, reflecting the approximate dollar value of the day’s trades, the highest among large U.S.-listed firms at $52 billion.

The latest blastoff in SpaceX shares came on a day when technology stocks were otherwise slipping, with the semiconductor index .SOX down 3 per cent and the Nasdaq Composite .IXIC off 0.5 per cent. Among the decliners were shares of options exchange CBOE Global Markets CBOE.K, off 8 per cent, while rival CME Group CME.O was down 2 per cent, the latest sign of investor angst over the rise of perpetual futures — contracts with no expiration date that enable traders to bet on price moves without owning shares or other assets.

“It’s time to approve regulated futures contracts that have no expiration date,” Commodity Futures Trading Commission Chair Michael Selig said on Monday on CNBC. “We’re going to make sure the product’s available, but it’s well regulated here in the U.S.”

CME CEO Terry Duffy warned this month that U.S. regulators are creating systemic risk by allowing products such as perpetual futures for bitcoin that typically carry large amounts of leverage.

On Tuesday, another exchange operator, Miami International Holdings MIAX.K, was down 9 per cent, a move William Blair analyst Jeff Schmitt said was driven by concerns about perpetuals that are “likely overdone.”

HEAVY TRADING, MORE VOLATILITY EXPECTED

Retail investors — who received about 20 per cent of the SpaceX IPO allocation — bought net $43.2 million worth of the shares as of 10:10 a.m. ET, building on more than $200 million in net purchases in the last two sessions, according to Vanda Research data.

Analysts and portfolio managers said investors should brace for volatility due to the relatively small float and high valuation of SpaceX.

The company reported sales of $18.67 billion last year and a net loss of $4.94 billion after merging with money-losing xAI — in contrast to many of Wall Street’s big technology companies that have posted bumper numbers. That puts its price-to-sales ratio at more than 150, compared with a trailing 12-month price-to-revenue ratio of 20 for Nvidia, the largest U.S. company by market value.

On Tuesday, its market value surpassed Amazon’s at $2.65 trillion and briefly topped Microsoft’s $2.92 trillion. Next up are Apple AAPL.O, Alphabet GOOGL.O and Nvidia NVDA.O, all above $4 trillion in market value.

The rally could continue, analysts said, as SpaceX is set for fast-track inclusion in the Nasdaq 100, which will soon make it a major holding for passive funds and ETFs that track the index, creating a fresh source of demand for its shares.

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FTSE Russell and MSCI are also set to add the stock to their indexes effective June 26 and June 29, respectively.

“While index inclusion alone is typically insufficient to drive sustained repricing, we see the combination of passive flows, momentum, and limited float driving upside beyond historical index-addition moves,” brokerage Zephirin Group said, initiating coverage on the stock with a “buy” rating.

SpaceX also said on Monday that its underwriters had exercised the “greenshoe” option to purchase additional shares, increasing the total proceeds from its initial public offering to $85.7 billion from $75 billion that it raised last week.

Earlier in the day, SpaceX also said it would acquire software company Anysphere for $60 billion.

​(Reporting by Shashwat Chauhan, Medha Singh and Sruthi Shankar in Bengaluru; Additional reporting by Saqib Iqbal Ahmed and Anirban Sen; Editing by Nivedita Bhattacharjee, Shinjini Ganguli, Rod Nickel, Colin Barr and David Gaffen)