Musk warns of low survival odds for SpaceX short sellers as bets intensify
Despite CEO Elon Musk’s public caution, short interest in the aerospace firm has climbed to 34 per cent of the float, with traders accumulating billions in paper profits following the share price’s decline from its post-IPO peak.
Elon Musk has issued a stark warning to market participants maintaining significant short positions in SpaceX (NASDAQ:SPCX), asserting that the survival probability of such firms is extremely low. The comment, posted on X, came in response to data indicating that bearish traders are doubling their bets against the company despite the CEO’s public caution. Musk stated, "I try to warn them, but they just double down," highlighting the growing disconnect between executive sentiment and market positioning.
Data from S3 Partners reveals the scale of the bearish wager, showing that approximately 34 per cent of SpaceX’s float is currently shorted. Furthermore, roughly 95 per cent of the shares available to borrow have been loaned out. This high level of short interest suggests that traders are heavily positioned for a continued decline in the stock price, a strategy that has yielded substantial returns so far.
SpaceX shares have fallen significantly from their post-IPO high of $225.64, dropping below the company’s $135 offering price. This decline has generated an estimated $15.5 billion in paper profits for short sellers as of late July. The stock’s volatility has been pronounced, with shares plunging 13 per cent following the company’s first earnings report as a public entity before staging a rebound. Despite this drop, Vanda Research data indicates that SpaceX became the most heavily purchased U.S. stock among retail investors tracked, suggesting a divided market sentiment.
Analysts at Ortex Technologies note that there is no sign of short sellers taking profits, with co-founder Peter Hillerberg stating that traders are leaning in harder. Ortex previously estimated that every $1 move in the stock price represents more than $300 million in exposure for traders on the short side. This massive concentration of risk means that a sudden spike in the share price could trigger a short squeeze, forcing traders to repurchase shares at higher prices to limit losses, potentially accelerating the upward price movement.
The strategy carries unlimited risk for short sellers, as there is no ceiling on how high a stock can rise, unlike long positions where losses are capped at the amount invested. While the high valuation, aggressive spending, and exposure to the speculative AI trade have raised questions about whether investors pushed the stock too far, the potential for violent swings remains. The situation underscores the dangers of concentrated bets, where being right on the general direction of a stock does not necessarily guarantee safety against sudden reversals.
