SpaceX Shares Surge, Market Cap Briefly Tops Microsoft

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Shares of Elon Musk's SpaceX surged more than 14 per cent on Tuesday, pushing the company's market valuation above that of Amazon and briefly ahead of Microsoft, as investors continued to pile into the newly listed stock. SpaceX shares were last trading at around $220, up 14.3 per cent on the day and more than 62 per cent above their IPO price of $135. The rally lifted the rocket and artificial intelligence company's market capitalisation to about $2.85 trillion, making it one of the world's most valuable companies. According to Reuters, Amazon's market value stands at $2.64 trillion, while SpaceX briefly overtook Microsoft's valuation of $2.92 trillion during trading. The world's three most valuable companies remain above the $4 trillion mark.

Options trading begins with strong demand

Investor interest intensified after options on SpaceX began trading on Tuesday, providing another way for traders to bet on the stock's future performance. Around 115,000 options contracts changed hands within the first 10 minutes of trading, with call options outnumbering put options by 1.7-to-1. SpaceX options became the third most actively traded single-stock contracts, behind only Nvidia and Tesla. "Today the SPCX options launch, offering standard monthly expiration and strikes ranging from $25 to $380. If call demand is heavy, dealers might be forced to buy SPCX into this low-liquidity situation," Brent Kochuba, founder of options analytics platform SpotGamma, said, as quoted by Reuters.

Analysts warn of volatility

Despite the sharp rally, several analysts cautioned that investors should be prepared for significant volatility given the company's relatively small public float and lofty valuation. "We can say with certainty that this valuation makes absolutely no sense today. People are buying SpaceX in the expectation that others will buy too and push the price higher — that's speculation," Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said. The company reported revenue of $18.67 billion last year and a net loss of $4.94 billion following its merger with loss-making AI firm xAI, according to Reuters.

Index inclusion may drive further gains

Market participants expect additional demand for the stock as SpaceX prepares for fast-track inclusion in the Nasdaq 100 index. The company is also set to be added to FTSE Russell and MSCI indices later this month. "While index inclusion alone is typically insufficient to drive sustained repricing, we see the combination of passive flows, momentum, and limited float driving upside beyond historical index-addition moves," brokerage Zephirin Group said while initiating coverage with a "buy" rating.

IPO proceeds rise to $85.7 billion

SpaceX also announced on Monday that underwriters had exercised the greenshoe option to purchase additional shares, increasing total proceeds from its initial public offering to $85.7 billion from the $75 billion raised last week. Trading activity remained exceptionally strong, with more than $23.1 billion worth of SpaceX shares changing hands by mid-morning on Tuesday, exceeding the combined trading volumes of Nvidia, Microsoft, Tesla and Apple. The company also disclosed plans to acquire software firm Anysphere in a deal valued at $60 billion.