Article by Yang Chen, Wall Street View
The upcoming buying pressure on SpaceX is not driven by improved fundamentals, but rather a mechanical consequence of an obscure index compilation rule being triggered—the release of restricted shares that boost weightings is also the largest potential source of selling pressure in the coming months.
The Nasdaq-100 Index’s quarterly rebalance, effective September 21, is expected to increase SpaceX’s weight from 1.25% to approximately 1.51%. According to calculations by J.P. Morgan strategist Min Moon’s team, this adjustment will trigger approximately $12.4 billion in passive net buying.
The direct catalyst for the increased weighting was the rise in the free-float ratio from under 10% after its IPO to nearly 30%—after over one billion restricted shares were unlocked, index rules automatically increased the inclusion weight of this $2 trillion-plus market cap giant.
However, the lock-up release is not over: over 1 billion shares will become tradable before the end of October, and approximately 1.3 billion shares will follow after the Q3 earnings report in mid-November, totaling over 2.3 billion shares. The interplay between short-term mechanical buying pressure and medium-term supply shock is becoming the key determinant of SpaceX’s pricing in the fourth quarter.
As of press time, SpaceX rose 0.06% on Tuesday, reaching its highest level in nearly two months.
Weight Doubling Mechanism: The Chain Reaction of Increased Free Float Ratio
The weight calculation for the Nasdaq 100 is based on the lower of total shares outstanding or three times the free-float shares. Stocks with low free-float ratios are significantly discounted in market capitalization calculations—free-float shares exclude insider holdings and shares subject to lock-up restrictions.
SpaceX was previously in this situation. Due to lock-up restrictions, its free float was less than 10%, and despite a market capitalization exceeding $2 trillion and ranking sixth among indices, its weight was only 1.25%, placing it 19th. With over one billion restricted shares unlocking, the free float increased to nearly 30%, directly triggering a recalculation of its weight.
According to Min Moon’s team at J.P. Morgan, the weight increase to approximately 1.51% will generate about $12.4 billion in net passive buying demand.
According to Nasdaq, approximately $1.7 trillion in assets tracked the Nasdaq-100 Index as of the end of the second quarter, including the well-known Invesco QQQ ETF (ticker: QQQ). The rebalancing schedule will be announced after market close on Friday. As more shares vest over the next year and the free float continues to rise, SpaceX’s weighting may increase further.
2.3 billion shares unlocking: The supply surge behind short-term buying pressure
The increase in the free-float ratio is essentially the result of restricted shares being unlocked, with even larger unlock volumes yet to come.
According to the schedule, over 1 billion restricted shares will be unlocked by the end of October; following the Q3 earnings report in mid-November, approximately another 1.3 billion shares will become tradable, bringing the total to over 2.3 billion shares.
The first batch of lock-up expirations in August (coinciding with SpaceX's first earnings report) had sparked concerns of massive selling, but insiders largely held their shares, and the selling pressure failed to materialize.
Ed O'Gorman, CEO of River Wealth Advisors, believes the real key event will occur when lock-up restrictions expire during the November earnings report, releasing a large volume of shares into the market.
Interactive Brokers’ Chief Strategy Officer Steve Sosnick said that the newly unlocked shares will either be sold to potential passive buyers or drive the stock price higher due to increased demand from index funds, with products like QQQ expected to generate additional demand.
Long-Short Divergence: Can Passive Buying Offset the Selling Pressure from Lock-Up Expirations?
In the short term, approximately $15.5 billion in passive buying is relatively certain; in the medium term, the scale and timing of unlock-related selling pressure depend on insiders’ willingness to sell, creating the largest current expectation gap.
Over the past four weeks, SpaceX's stock has traded sideways between $133 and $150, fluctuating around its $135 IPO offering price, with no fundamental catalysts. Ed O’Gorman noted that the market price will be partially driven by forced buying, and it will take time to truly gauge market sentiment toward this stock.
Similar rules are not unique to Nasdaq. S&P Dow Jones Indices also use free-float adjusted market capitalization to calculate weights; two years ago, after Berkshire Hathaway reduced its stake in Apple, Piper Sandler estimated that this would trigger approximately $40 billion in passive fund buying.
SpaceX was added to the Russell 1000 Index in June this year, but the S&P 500 requires a minimum of 12 months of trading history, meaning it will not be eligible for inclusion until mid-2027 at the earliest, leaving further upside potential for passive buying demand.
The lock-up expiration triggered by the Q3 earnings report in mid-November will be a key moment to test SpaceX's true market depth and determine the short-term battle between bulls and bears.