SpaceX's First Lockup Expiry: What Happens When a 95%-Locked Stock Starts to Free Up

On August 6, nearly $100 billion worth of SpaceX shares suddenly went from "can't sell" to "can sell." And just the day before, on August 5, the stock had already tumbled nearly 14% — so the moment arrived charged.

I say "suddenly" because before this, about 95% of its shares were locked — nobody could touch them. How can a listed company that trades every day have 95% of its shares off-limits to selling? For that, we have to start from the day it listed.

On Listing Day, 95% of the Shares Were Locked

When a company goes public, we tend to assume its shares can be freely bought and sold from then on. That's not how it works.

What actually gets floated to the market on listing day is often only a small slice. The large blocks of shares in the hands of founders, early VC firms, and company employees are all locked up by a written agreement, barred from selling for a stretch of time. That stretch is called the lockup period, and when it ends and they can sell, that's called the unlock.

How long is the lock, and who decides? It's agreed with the underwriters when the company goes public and written into the prospectus. A common US lockup runs three to six months, though longer ones exist too. And often it's not released all at once, but unlocked in batches, one tranche at a time. SpaceX's first tranche this time has a rather unusual trigger: the release of its first earnings report after listing, plus two full trading days after that.

So why lock at all, and why in batches? The reason is simple: to stop the people who got in early at rock-bottom prices from dumping all their shares onto freshly arrived retail investors just days after listing and blowing the price wide open. The lockup gives the market a buffer, and batching makes that buffer smoother — a bit of protection for those who come later, too.

At this point, there are two numbers worth telling apart. One is total shares outstanding — how many shares the company has issued in all. The other is the float — the portion of those shares that can actually be freely traded right now. The two can sometimes differ by a lot. SpaceX is an extreme example. Total shares outstanding are around 13 billion, yet at the moment of listing, less than 5% could be freely traded. The other 95% sat submerged like an iceberg, quietly queuing, waiting for their unlock day.

August 6: The First Lock Comes Off

August 6 is the day the first batch's number comes up. This tranche unlocks about 910 million SpaceX shares — 40% more than the entire float that could previously trade freely (about 640 million). The moment the gate opens, the float jumps from 640 million to 1.55 billion, and its share of total shares outstanding rises from about 5% to about 12%.

And this is just the beginning. By plan, further tranches will keep unlocking if their conditions are met, and by year-end the freely tradable portion could climb all the way to 40%. So August 6 is not the endpoint. From here, the shares that can be freely traded on the market will grow batch by batch, and only then does this stock slowly move from the extreme of "almost nothing to buy or sell" back toward what a normal stock should look like. For a normal stock, most of the shares can trade at any time to begin with — unlike SpaceX, where what's freely tradable right now is only just over 10%.

Why the Extra Shares Weigh on the Price

So with this many shares suddenly sellable, what happens to the stock price? Here's the spot that's easiest to get wrong.

An unlock doesn't mean these shares get sold that day; it just means the pool of "people who can sell" suddenly gets a lot bigger. But that alone is enough to make the price go soft.

Picture a housing estate with 10,000 units, where only 500 have ever been listed for sale — scarcity props the price up. Then one day the management suddenly posts a notice: another 700 units are coming, with more by year-end. Even if not a single one changes hands, once buyers know there's plenty more supply behind it, they stop rushing to bid high, and the price naturally eases down.

Not to mention that the price this group paid for their shares in the first place is often frighteningly low. Early VCs and company employees mostly got in when the company wasn't yet public and the valuation was low; some shares were simply handed out as salary. Their entry price might be a tiny fraction of today's price. With that much unrealized gain sitting there, the urge to lock it in the moment they can sell is stronger than anyone's.

There's one more layer, and it has to do with the small float itself. The smaller the float, the more easily it gets pushed around by small money. Normally a little buying can prop it way up, but once an unlock enlarges the float, that same buying can no longer hold it up. This is also why newly listed stocks often swing wildly — the tighter the lock, the more violent the volatility tends to be around the unlock.

But Unlock Doesn't Mean "Must Fall"

Flip it around, and an unlock isn't a verdict of a guaranteed drop either.

The unlock date is set in black and white; anyone can work it out. The real selling pressure hasn't arrived yet, but the price has often already priced in part of that worry in advance. Besides, being able to sell doesn't mean everyone wants to — if holders still like the company, they can just hold tight.

So an unlock brings pressure, not a verdict. How many people actually sell once these shares are released, and whether the price can hold, will only become clear over the next few days.

So Was the 14% Drop on August 5 the Unlock's Fault?

The day before the unlock, on August 5, SpaceX had already fallen nearly 14%. But that drop was earnings hitting it — a completely separate matter from the unlock.

After the close on August 4, SpaceX turned in its first earnings report since listing. Revenue nearly doubled year over year, surging to $7.8 billion, and losses were narrower than expected. Looking at just those two lines, it's good. The bad part is in another line. Capital expenditure this quarter surged to $18.4 billion — more than six times the $2.8 billion in the same period last year, and nearly 40% above market expectations. The money was almost all burned on AI infrastructure.

Institutions saw the pressure on cash flow and turned to leave. Retail saw the long-term AI moat and bent down to pick it up. The same earnings report — one side cutting losses, the other bottom-fishing. This whole disagreement is about whether the company itself is worth it. That's a completely different thread from the unlock.

Next Time With a New Stock, Tell the Two Kinds of Drops Apart

Put these two things side by side and it becomes clear. Capex answers "is this company worth owning" — that's the demand side. The unlock answers "how many people might sell right now" — that's the supply side. They can push down together, and of course they can each go their own way.

At the end of the day, a big price drop comes in just two kinds. One is that the company really has gotten worse; the other is simply that more people want to sell it. The two look the same, but underneath they're worlds apart.

So next time you run into a stock falling hard, don't rush to ask how much it dropped. First tell apart which kind it is. If it's a company problem, it comes down to your judgment of the company. If it's a supply-of-shares problem, flipping through two tables gives you a rough handle: one for the float's share of the total, one for the unlock schedule.

Tell these two kinds of drops apart, and you won't panic in the wrong direction when everyone else is panicking.

And keep in mind — August 6 was only the first gate. With more tranches set to unlock through year-end, SpaceX's transition from a locked-up 5% float toward a normal, freely trading stock is only just beginning. This is a story that will keep playing out for months.