Elon Musk company’s pre-IPO market has fallen 27% in three weeks

A Closer Look at SPCX: SpaceX’s Impending IPO and the Decline of a 5x-Leverage Perpetual on Hyperliquid

Traders have been closely monitoring the performance of a 5x-leverage perpetual on Hyperliquid tied to SpaceX’s impending IPO, which is expected to be the largest in history. Over the past three weeks, the product, tickered as SPCX, has seen a decline in its value. As of Wednesday, SPCX was trading near $157, down approximately 27% from its launch price in mid-May of around $216, after briefly reaching $230.

Despite the decrease in value, it is important to note that this does not necessarily indicate that traders are betting against SpaceX. SPCX is still trading above the $135 IPO price, but the implied first-day premium has seen a significant reduction. In May, the contract priced SpaceX at roughly 60% above the offer price, whereas as of Wednesday, it stood closer to 16%.

SpaceX set the offer price at $135 per share, without a price range for investors to influence it during the bookbuild process. This departure from the typical IPO process, where bankers adjust the price based on demand, has made SPCX one of the few places where the price of a SpaceX-linked product is actively moving before the stock is publicly available.

It is important to note that the SPCX perpetual does not grant holders any ownership of shares, allocation rights, or direct claim on SpaceX. Instead, it is a cash-settled derivative that allows traders to speculate on the expected equity value of the company. Traders have real money at risk, unlike in an IPO indication of interest, and can incur losses before any shares are traded.

Despite the decline in SPCX prices, the demand for SpaceX’s IPO remains strong. According to a report by Reuters, SpaceX has attracted over $250 billion in investor interest for a $75 billion raise, making the deal significantly oversubscribed. This overwhelming demand is a common occurrence in hot IPOs, where large investors request more stock than they anticipate receiving.

Traders continue to anticipate a premium above the $135 offer price for SpaceX, despite external market pressures. The recent weakening of the cryptocurrency market and the need for investors to liquidate assets to fund SpaceX allocations have added additional stress to the risk market where SPCX is traded.