Shares of Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, have been on a wild ride during their first two months since the stock's initial public offering (IPO). The company saw its value touch $3 trillion at its peak just a few days after its market debut, but the market cut that price by more than half at one point, sending the stock price below its IPO price last month. After its second-quarter earnings report and the first of several lockup expirations, letting early SpaceX investors and employees sell their shares, the stock climbed back above its IPO price.
Some investors may see that strong performance in the face of potential selling pressure as a sign that the stock can keep climbing. Here's what history has to say. This Rare Signal Is Flashing Again.
In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » It's important to note that SpaceX's trajectory since its IPO isn't uncommon.
Most stocks experience a pop on their first day of trading, just as SpaceX did. SpaceX saw its shares close 19% above its IPO price of $135 per share on its first day of trading. Most stocks hit a relative high in their first few days of trading before moving lower.
SpaceX peaked at about $225 per share on its third day of trading. Most stocks also eventually trade below their IPO price. SpaceX breached its $135 IPO price on July 15, about a month after its debut.
In fact, 90% of IPOs eventually trade for less than their offer price, with the median stock taking about six weeks to do so, according to an analysis from Banyan Lane Research. Most stocks quickly recover to their IPO price. It took SpaceX 18 trading days to do so.
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