SpaceX Breaks Lockup Rules to Let Early Investors Cash Out Shares

SpaceX, the rocket firm founded by Elon Musk, is preparing to introduce an unusual post-initial public offering (IPO) share-resale setup. The system will allow shareholders to sell their shares earlier than the typical six-month lock-up period after public listings.Meet Samuel – Your Personal Investing ProphetCBRS has a long & short ETF? Explore CBRX & CBRZ Through this strategy, the aerospace company will avoid a large number of shares hitting the market shortly after its upcoming IPO, which could value SpaceX at roughly $1.75 trillion. SpaceX Introduces Staggered Share Release Plan SpaceX plans to gradually unlock restricted shares through a step-by-step release system. The structure is partially linked to the firm's performance and its stock price targets. The approach differs from the traditional 180-day lock-up period commonly used in U.S. IPOs. Usually, early investors and insiders are not allowed to sell shares immediately after a listing to help stabilize market trading. However, SpaceX is planning to allow some investors and insiders to sell their shares ahead of the lock-up period. The system will help the firm spread share sales over several months and avoid one large wave of stock entering the market at once. Under the proposed structure, up to 20% of restricted shares could become eligible for resale shortly after SpaceX reports its second-quarter earnings. Another 10% of shares could then become available if the stock trades at least 30% above its IPO price. Subsequently, roughly 7% of SpaceX's stock is scheduled to unlock gradually over 70 to 135 days after the IPO. This will then be followed by another 28% after a later earnings report. Ali Perry, an attorney at Mayer Brown specializing in IPOs, noted the gradual release approach could help prevent a major "lock-up cliff." This is a situation in which a massive amount of stock suddenly floods the market in a single day. Musk Faces Longer Restrictions Despite Flexible System Although SpaceX has reduced bans for many shareholders, Musk has agreed to stricter limitations on his own shares. This means he has less control over when he can sell his stake. According to company filings, Musk controls 85.1% of the company's voting power and holds 12.3% of the economic interest in Class A shares. As a result, he will be restricted from selling his shares for 366 days. The company's gradual release system is similar to those adopted by some top firms, including Cerebras Systems (CBRS), an artificial intelligence (AI) chip firm, during the IPO boom between 2020 and 2021. The setup helped the firm grow when big companies had greater leverage in negotiating listing terms. Legal experts say the structure may also help create more orderly trading after the IPO. However, it could spread the stock's volatility over several months rather than concentrating it around a single lock-up expiration date. Can I Buy SpaceX Stock After IPO? SpaceX may allocate around 30% of its shares for retail investors. If approved, access to the offering will be available through major brokerages, including Charles Schwab (SCHW), Fidelity Investments (FNF), and Robinhood (HOOD). For more information on SpaceX ahead of its IPO, visit the TipRanks Private Company Center.