The Rhyme: SpaceX Stares Down a $99B Lockup & Its 2012 Echo

"History doesn't repeat… but it rhymes." — Mark Twain

SpaceX enters the most dangerous week of its short life as a public company. The stock closed Friday at $108.37, down more than fifty percent from its June 16 peak of $225.64 and twenty percent below the $135 price it IPO'd at less than eight weeks ago. Tomorrow brings the company's first-ever public earnings report. Thursday, August 6, brings something worse: the expiration of the initial lockup, releasing 911.5 million pre-IPO shares into a market where only 639 million shares currently trade. At today's prices, that is roughly $99 billion worth of stock that insiders will be free to sell.

SPCX: $108.37 | −50% from peak | Lockup: 911.5M shares ($99B) | Earnings: Aug 4 | Mkt Cap: $1.43T

The last time the biggest IPO of a generation cratered this fast and then got hit with a wall of insider supply, the year was 2012, and the company was Facebook.

Mark Zuckerberg's hoodie was already a punchline by then. Facebook had gone public on May 18 at $38 a share in the most anticipated offering the technology world had seen since Google. The Nasdaq exchange had technical glitches that delayed the opening by half an hour, and traders across lower Manhattan couldn't tell whether their orders had gone through. Morgan Stanley, the lead underwriter, spent the entire afternoon buying shares just to keep the price from cracking below $38. The stock closed at $38.23. Up twenty-three cents. Morgan Stanley called it a smooth debut. Nobody else did.

Within four days the stock was at $31. By mid-June it was trading in the mid-twenties, and a quiet dread had settled over every employee sitting on vested options with no way to sell. The lockup agreements wouldn't begin to expire until August. On July 26, Facebook reported its first quarterly earnings as a public company. Revenue came in at $1.18 billion, a slight beat. None of it mattered. The stock dropped to $22.28 the next morning because the earnings call had confirmed the one fear nobody could shake: more than half of Facebook's 955 million users were on their phones, and the company had almost no mobile advertising revenue. The business was growing in the one place where it couldn't make money.

Then came August 16. The first lockup expired at midnight, and 271 million shares became eligible for sale. Peter Thiel, the venture capitalist who had written a $500,000 check to a nineteen-year-old Zuckerberg back in 2004, sold nearly 20 million shares that Thursday and Friday at prices between $19.27 and $20.69. His total cash-out crossed a billion dollars. Other early investors followed him out. The stock hit $19.69 that morning and closed at $19.87, down 6.3 percent in a single session.

August wasn't the end of it. More lockups were stacked behind this one — 234 million shares in October, then the big one in November: 777 million shares, nearly doubling the entire public float overnight. By September 4, Facebook touched $17.55. That was fifty-four percent below the IPO price, barely three and a half months after the company had gone public. The most valuable social network on earth was worth less than half of what Morgan Stanley said it was worth.

Both times, Wall Street priced a decade of future dominance into day one — then spent the summer taking it back, share by unlocked share.

Here is what happened after Facebook hit $17.55 on September 4, 2012.

Not much, for a while. The stock drifted sideways through the fall, bouncing between $19 and $23. The November lockup — the one everyone called the killshot, 777 million shares nearly doubling the float — came and went with surprisingly little damage. The sellers who wanted out had already gotten out in August and October. By December, Facebook was back above $26. By January 2013 it crossed $30.

The reason was simple. While the stock was dying, Zuckerberg was quietly solving the mobile problem. Facebook launched mobile app-install ads in August 2012, the same month the lockup was dragging the stock toward its all-time low. Nobody noticed because everyone was watching the ticker instead of the product. By the third quarter, mobile was generating real revenue for the first time. By the fourth quarter, it was 23 percent of all ad revenue. By mid-2013 it was 41 percent. The stock reclaimed its $38 IPO price in August 2013, fourteen months after the offering. Five years later Facebook was worth $440 billion.

The lesson: the lockup created the noise, and the business fundamentals were the signal. The investors who bought at $18 and $19 in the fall of 2012 — while Peter Thiel was selling and cable news was running countdown clocks to the next lockup — got one of the best trades of the decade. They didn't buy because the selling stopped. They bought because they could see that mobile advertising was working.

The question for SpaceX is whether there is a signal hiding underneath the lockup noise. Starlink is the revenue engine. The launch cadence is setting records. But the company lost nearly five billion dollars last year, and tomorrow's earnings will tell us whether that number is getting better or worse. Jim Cramer told viewers last week to wait until after Thursday's lockup to buy the dip. In 2012, the investors who waited for the all-clear missed the bottom. The ones who bought during the panic — once the fundamentals gave them a reason — got the trade of a lifetime.

The lockup is the noise. Tomorrow's earnings are the signal. If SpaceX shows a path toward profitability the way Facebook showed a path toward mobile revenue, the August 6 selling wave becomes the entry point of the year. If it doesn't, there is a long way down to September.

The Wall Street Journal reported last week that Tesla is exploring the sale of its China unit to clear a path for a potential SpaceX merger. The last time Musk combined two of his public companies, it was 2016, and the SolarCity deal cost Tesla shareholders $2.6 billion over furious objections that ended up in a Delaware courtroom.