SpaceX (SPCX) shares remain under pressure as short interest climbs to roughly 32% of the active float, prompting CEO Elon Musk to issue a stark warning to bearish traders. In a recent post on X, Musk stated that firms maintaining a significant short position in SPCX over time have a very low survival probability.
The warning comes as SpaceX stock has fallen approximately 40% from its post-IPO high above $200, driven largely by valuation concerns. Short sellers have built a massive $25 billion bet against the company, with short interest soaring from 40 million shares a month ago to 206 million shares. Analysts attribute this rapid increase to the firm's high valuation multiple—over 80 times sales—and persistent multi-billion-dollar annual net losses fueled by heavy AI compute expenditures.
Short Squeeze Potential Looms
Despite the bearish sentiment, some market participants see the setup as ripe for a classic short squeeze. With nearly one-third of the float sold short, any positive catalyst could force bears to cover positions rapidly. The first quarterly earnings report as a public company, scheduled for August 4, could serve as that catalyst. If Starlink subscriber growth, space launch revenues, or margin figures exceed expectations, the resulting rally might trigger margin calls and accelerate upward momentum.
This dynamic echoes patterns seen in other heavily shorted stocks. For context, a similar situation unfolded recently with Zcash, where a combination of upgrade news and short squeeze potential drove price action.
Lock-Up Expiration Adds Complexity
However, the squeeze potential is complicated by upcoming supply changes. Following the earnings print, initial post-IPO lock-up restrictions will begin to expire, releasing millions of insider and employee shares into the public float. This influx of liquidity will expand the tradable supply, making it easier for bears to borrow shares and cover positions over time. As noted in a recent analysis of SpaceX stock slipping 2% amid lockup and short interest concerns, the combination of high short interest and impending share unlocks creates a volatile mix.
Wall Street Remains Divided
Despite the recent underperformance, SpaceX retains support from high-profile investors. Cathie Wood of Ark Invest continues to accumulate SPCX shares on pullbacks, believing the company could eventually become the most important in history. Wall Street analysts maintain a Moderate Buy consensus, with price targets as high as $800—implying a potential sixfold increase over time. This optimism contrasts with the bearish positioning, as highlighted in a recent report on SpaceX stock dropping 40% from its peak yet analysts seeing 76% rebound potential.
In the near term, traders remain sharply divided. Long-term investors align with Musk's vision of dominating space logistics and next-generation connectivity, while short sellers bet that continued losses and valuation concerns will pressure shares further. The August 4 earnings report will provide concrete clarity on which side is correct.
This article is for informational purposes only and does not constitute financial advice.
