SpaceX Bears May Be Right On Value And Wrong On Timing

Before (SPCX) went public, I wrote that the extraordinary demand for its IPO might be the warning. The shares were priced at $135, climbed to $225.64, and closed Friday at $115.07. Investors who loved the stock six weeks ago now appear eager to sell it. The company has lost almost half its value since the high. Short sellers, meanwhile, are sitting on an estimated $15.5 billion of paper profits.
That first article was about scarcity and behavior. Too many investors chased too few shares, and the excitement around owning (SPCX) became more important than the price they paid.
When the stock returned to its IPO price, I wrote that $135 was not automatically a buy. An offering price is a number agreed upon during a sales process, not a declaration of fair value.
Both warnings have held up. But markets move, and the risk has now moved with them.
The dangerous crowd is no longer only the one that chased (SPCX) higher. It may now include the investors who believe the decline has become an easy one-way trade.
I still think (SPCX) is expensive. At Friday’s price, the company is worth roughly $1.5 trillion. Aswath Damodaran, the NYU professor known as the dean of valuation, estimated its equity value at around $1.3 trillion before the IPO. His largest concern was the value being attached to the artificial-intelligence business, where the assumptions are much harder to defend than they are for Starlink or the launch operation. The bears have a case. My concern is that they are becoming too comfortable with it.
The Easy Part of the Short May Be Over
Around 360 million (SPCX) shares, representing roughly 56% of the freely traded stock, were out on loan earlier last week. Short sellers were not using the decline to take profits. According to Ortex, they were increasing their positions. That does not prove they are mistaken. Crowded trades can remain profitable for a long time. It does tell us what might happen if the news starts improving.
A short seller eventually has to buy the shares back. When a large part of the available stock has already been borrowed and sold, even a modest change in expectations can create demand from investors who are not buying because they suddenly love the company. They are buying because the trade is moving against them. This is the mirror image of the IPO. In June, investors were afraid they would miss the rise. Now short sellers are afraid they will miss the decline. A stock rising from $135 to $225 felt safer because other investors appeared to agree with the bullish story. A stock falling toward $115 makes the bearish argument feel more obvious because the price appears to confirm it. Price is evidence, but it is not always proof.
(SPCX)’s launch economics did not deteriorate by 49%. Starlink did not lose half its subscribers. The stock fell because expectations, positioning, and the supply of willing buyers changed.

What Friday’s Starship Flight Changed
After the market closed Friday, (SPCX) completed the 13th test flight of Starship. The spacecraft deployed 20 advanced Starlink satellites, communicated with them, and completed its best reentry so far. Starship performed a controlled splashdown in the Indian Ocean and remained intact and floating. The booster return was less successful because too few engines reignited, causing it to hit the Gulf of Mexico faster than planned.
One successful test does not justify a $1.5 trillion valuation. It does not resolve the economics of xAI, eliminate (SPCX)’s capital requirements, or prove that Starship is ready for routine commercial service. But it does reduce some operational uncertainty.
Starship is central to the next generation of Starlink satellites. Larger satellites can increase network capacity and support direct-to-phone services, but deploying them economically depends on (SPCX) making Starship work reliably. For the long-term investor, Friday’s flight is one data point.
For a heavily shorted stock, the outcome may be more immediately significant. The shares have not yet traded since the flight. Short sellers went into the weekend with large profits and growing confidence. They will return Monday to a company that just delivered a visible technical success. That does not guarantee a rally. It makes the timing of pressing the short button less attractive.
Earnings Matter More Than the Rocket
The more important catalyst is August 4, when (SPCX) will report its first quarterly results as a public company after the market closes. Investors will finally get a better view of Starlink growth, operating margins, cash generation, capital spending, and the amount of money that (SPCX) is committing to AI. Those figures should matter more than the excitement surrounding a test flight.
In Price Catalysts, I argue that a valuation gap is rarely enough by itself. Something has to change expectations, cash flow, or ownership before the market reassesses the price.
(SPCX) is approaching all three at once.
If Starlink is growing faster than expected and generating enough cash to support the company’s larger ambitions, the valuation argument becomes less comfortable for the bears. (SPCX) would not suddenly become cheap, but the numbers could show that the business is growing toward the price faster than expected.
If the report shows weak cash generation, uncontrolled AI spending, or disappointing Starlink economics, the bears will have fresh evidence, and the stock can fall further. The mistake is to assume the answer is already known just because the shares have been going down.
The Trade and the Investment Are Different
There is still a major complication. On the second trading day after the earnings report, employees and some early investors may become eligible to sell 911.5 million shares. The original IPO made less than 5% of (SPCX) available to public investors. The coming unlock could introduce far more stock into the market and remove the scarcity that helped drive the early rally. That is why I separate the possible short squeeze from the long-term investment. The stock could rally after the Starship flight or a strong earnings report and still face selling when insiders gain liquidity.
An employee who has spent years building (SPCX) may sell because they want to buy a house, pay taxes, or diversify their wealth. That sale tells us very little about Starlink’s future. It can still push the stock lower.
For traders, the question is whether the positive catalysts arrive before the new supply. For investors, the better question is whether the business remains strong after the market has absorbed it. I would not initiate a large new short after a 49% decline, with more than half the free float on loan, a better Starship flight completed, and earnings approaching.
I would not chase the stock higher on Monday either. A rally that fails below the $135 IPO price would show that sellers still control the stock. Strong earnings followed by the shares holding up through the first unlock would be much more meaningful. That would suggest the business is beginning to overcome the ownership pressure.
If the unlock drives (SPCX) toward $100 while Starlink remains healthy, that would be closer to the investment setup I described previously. I was cautious when investors believed (SPCX) could only rise. I am cautious again now that a crowded group appears convinced it can only fall.  The bears may be right about the valuation. But after the decline, the positioning, and Friday’s flight, they no longer have the timing to themselves.