Elon Musk Warned SpaceX Short Sellers — But Their Gains Just Hit $15.5 Billion

SpaceX (SPCX) stock fell over 2% on Thursday, extending a sharp drop that has pushed the shares below its $135 IPO price. The decline has handed short sellers an estimated $15.5 billion in paper gains through July 22, according to Ortex data cited by Reuters. That comes despite CEO Elon Musk's recent warning that firms with large short positions in SpaceX have a "very low" chance of surviving over time.

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Despite Musk's warning, short sellers have continued betting against SpaceX as the stock has fallen.

Short Sellers Keep Betting Against SpaceX

Short selling is a bet that a stock will fall. A short seller borrows shares and sells them, hoping to buy them back later at a lower price and pocket the difference.

Ortex estimates that nearly 196 million SpaceX shares were sold short in late July, or about 31% of the shares available for trading. That is up sharply from roughly 40 million shares around the time of the IPO. Those bets have paid off so far. Short sellers' estimated paper gains stood at $8.7 billion on July 16. By July 22, that figure had climbed to $15.5 billion.

SpaceX went public at $135 per share on June 11 and surged as high as $225.64 soon after. The stock has since dropped to around $114, wiping out much of its early rally.

Why the Short Trade Could Still Be Risky

The growing short position cuts both ways. If SpaceX keeps falling, short sellers could add to their gains. But with so many shares now sold short, a sudden rally could quickly turn against them.

If SPCX rises sharply, some short sellers may rush to buy shares to close their positions and limit losses. That buying could push the stock even higher, creating what is known as a short squeeze.

This helps explain Musk's warning. He believes SpaceX's long-term growth could eventually prove short sellers wrong. For now, though, the stock's slide has worked firmly in their favor.

SpaceX Earnings and Share Unlock Come Next

SpaceX is set to report its first quarterly results as a public company on August 4. Investors will be watching for signs of growth and updates on the company's spending plans.

Then comes another major event. Starting August 6, about 911.5 million shares held by insiders and other early holders could become eligible for sale. That does not mean all those shares will be sold. However, if many holders decide to sell, the added supply could put more pressure on SPCX stock.

With earnings and the share unlock approaching, short sellers now face a big test. The next major move in SPCX could decide whether their $15.5 billion in gains grow — or start to disappear.

What Is SPCX's Stock Price Target?

SPCX stock has a Strong Buy consensus rating on TipRanks based on 23 Buys, five Holds, and one Sell assigned after its IPO. The average price target for SpaceX is $243.81, implying an upside of 115.74% from the current price.