Investors who borrowed SpaceX shares and sold them on a bet the price would keep falling have been abandoning that bet all week, and the buying they must do to close it out is helping push the stock higher. That is what drove Wednesday’s move: SpaceX traded near $146 in afternoon action, up roughly 9% on the session and about 40% above the record low it hit on Aug. 3.
Short interest in the stock has collapsed to about 11% of publicly traded shares, down from a peak near 34% just last week, according to figures from research firm S3 Partners. Two things caused that drop, and only one of them is bearish investors giving up.
The first is genuine retreat. “Shorts that wanted to short are out of bullets,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. Traders had already committed as much capital as the trade could absorb, and once the stock turned against them, a meaningful number bought shares back to cut their losses.
The second is arithmetic. Short interest is measured against the pool of shares actually available to trade, and that pool doubled last Thursday. Just over 911 million SpaceX shares became eligible for trading when the company’s first lockup period expired — roughly 7% of shares outstanding, and more than the 639 million shares sold in the June initial public offering. The tradable float jumped from 4.9% to 11.8% of the company, freeing stock worth close to $100 billion. Even if not a single bear had covered, the percentage would have fallen simply because the denominator got bigger.
The setup for all of this was ugly. SpaceX reported its first quarterly results as a public company on Aug. 4, and while revenue beat, investors balked at the scale of spending on artificial intelligence infrastructure. The stock sank almost 14% the next day, its second-worst session on record, closing at an all-time low of $108.27. With more than 900 million insider shares about to hit the market, bears saw a second leg down coming.
It never arrived. Shares rose 6.1% on the day of the unlock, with volume above 250 million shares — a level not seen since the stock’s debut week, indicating the new supply was absorbed rather than dumped. Friday brought a 15.8% surge, helped by news of a $16.8 billion joint investment with Tesla in a Texas semiconductor plant called Terafab that is expected to create at least 3,000 jobs. By Monday the stock had added another 4%, closing above its $135 offering price for the first time since July 15.
Wednesday added two more supports. Norway’s sovereign wealth fund disclosed a stake in the company, and a cooler-than-feared inflation reading eased pressure across the market. July consumer prices rose 3.4% from a year earlier.
The danger for anyone still short is mechanical. Each bear who buys shares to exit pushes the price up slightly, which squeezes the next bear, who then buys as well. That loop is called a short squeeze, and SpaceX had been carrying one of the largest short positions on any U.S. large-cap stock heading into August — roughly $24.6 billion of bearish bets as of late July. Elon Musk had repeatedly warned publicly that traders betting against the company were making a mistake, and for weeks they ignored him profitably.
The underlying quarter helps explain why buyers stepped in. Second-quarter revenue reached $7.81 billion, up 92% from a year earlier, with Starlink subscribers doubling to 12 million and backlog at $47.5 billion. The loss came in at nine cents a share against expectations of a 23-cent loss, and the company holds roughly $100 billion in cash against planned capital spending above $18 billion for AI and Starship. The average analyst price target sits at $231.40, with 28 buy ratings against two sells.
What comes next is the part investors should watch. Thursday’s expiration was only the first of nine staggered tranches scheduled over the coming year, so additional supply will keep arriving on a known calendar rather than all at once. A further unlock is triggered if the shares hold above $175.50 for five of any ten trading days — meaning a strong enough rally would itself release more stock into the market and cap the move. The squeeze that is lifting SpaceX today carries its own brake.
JBizNews Desk | Wall Street
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