SpaceX (ticker: SPCX) started trading last week in the largest IPO in history.
It's a good time to look at what an IPO is and how things progress once a company goes public. Companies IPO to raise money and to give their early investors a way to cash out.
SpaceX is a unique example. It stayed private for more than two decades before deciding to hit the public market.
Going public opens ownership to outside investors and puts its financials on the public record.
Early on, just a slice of a company's shares are available for the public to trade. That slice is called the float. It leaves out shares held by founders, insiders, and other restricted holders. SpaceX is unusually tightly held, with Elon Musk keeping firm control, so its float is small relative to its size.
That can have consequences. If investors are all chasing the same low float, it can cause the price to swing wildly, particularly early on as that’s when there are the least shares available.
More shares will make their way into the market as lockups, or sale restrictions, expire for various classes of pre-IPO/IPO owners.
Lockups are usually set between 30 and 180 days post-IPO.
Meta Platforms, Inc. (Ticker: META), formerly Facebook, is the classic lesson. It was the most anticipated tech IPO of its era and yet it slid for months after listing, as lockups expired and more shares reached the market.
An IPO unfolds over time. Early demand and early liquidity are two different things. The float and lockup calendar say more about how a new stock trades than the headline valuation.