SpaceX vaults past Amazon's market value as options listing fuels surge

SpaceX roared past Amazon's market valuation on Tuesday and briefly topped that of Microsoft, rapidly scaling the list of the world's most valuable companies on a topsy-turvy trading day fueled by frenzied action in the firm's newly listed option contracts.

SpaceX shares rose 4.8% to close at USD 201.80, giving Elon Musk's company a market value of roughly USD 2.655 trillion — some USD 800 billion more than its value when it sold its record initial public offering last week and about USD 10 billion more than that of Amazon, until Tuesday the fifth-largest US-listed firm by market value.

Shares surged early on Tuesday as investors bet on Musk's sprawling empire that spans rockets to AI, even though the stock carries a higher valuation than the other trillion-dollar behemoths.

The stock is expected to enjoy additional demand in coming weeks as it joins major indexes. Even so, selling was strong in the afternoon, with SpaceX shares giving back the majority of gains that at one point took them as high as USD 225.64.

"It's a USD 2.5 trillion company, but it certainly feels like one of those meme stocks, the way it's trading," said Joe Saluzzi, co-head of equity trading at Themis Trading.

"We've seen momentum in the past; they just tend to run and you have to be very, very careful with these types of names."

OPTIONS TRADING LAUNCHES

A big driver of Tuesday's gains was the launch of options in SpaceX stock, which confer the right, though not the obligation, to buy or sell the shares at a certain price by a stated date. They are often used by traders seeking to cash in on rising interest in a stock or to wager that shares will rise or fall quickly.

More than 500,000 SpaceX options contracts changed hands within the first hour of trading and more than 1 million by early afternoon, according to Trade Alert data. SpaceX's heavily bullish options trading volume likely helped lift the stock early in the session, said Brent Kochuba, founder of options analytics service SpotGamma.

A surge of options volume can at times cause an underlying stock to also swing as options dealers, who facilitate trading by taking the other side of options trades, buy and sell shares to square their own risk.

"If you're a market maker, you can't hedge SpaceX with anything else other than SpaceX," he said.

VOLUME SURGE

Trading volume in SpaceX shares was enormous, with turnover in the rocket company's shares, reflecting the approximate dollar value of the day's trades, the highest among large US-listed firms at USD 61 billion.

The latest gains in SpaceX shares came on a day when technology stocks were otherwise slipping, with the semiconductor index down 3% and the Nasdaq Composite off 0.5%. Among the decliners were shares of options exchange Cboe Global Markets, off 9%, while rival CME Group was down 2%, the latest sign of investor angst over the rise of perpetual futures — contracts with no expiration date that enable traders to bet on price moves without owning shares or other assets.

“It’s time to approve regulated futures contracts that have no expiration date,” Commodity Futures Trading Commission Chair Michael Selig said on Monday on CNBC. “We’re going to make sure the product’s available, but it’s well-regulated here in the US”

CME CEO Terry Duffy warned this month that US regulators are creating systemic risk by allowing products such as perpetual futures for bitcoin that typically carry large amounts of leverage.

On Tuesday, another exchange operator, Miami International Holdings, was down 9%, a move William Blair analyst Jeff Schmitt said was driven by concerns about perpetuals that are “likely overdone.”

HEAVY TRADING, MORE VOLATILITY EXPECTED

Analysts and portfolio managers said investors should brace for volatility due to the relatively small float and high valuation of SpaceX.

The company reported sales of USD 18.67 billion last year and a net loss of USD 4.94 billion after merging with money-losing xAI, in contrast to many of Wall Street's big technology companies that have posted bumper profits.

On Tuesday, its market value surpassed Amazon's at USD 2.646 trillion and briefly topped Microsoft's USD 2.92 trillion. Next up are Apple, Alphabet, and Nvidia, all above USD 4 trillion in market value.

The rally could continue, analysts said, as SpaceX is set for fast-track inclusion in the Nasdaq 100, which will soon make it a major holding for passive funds and ETFs that track the index, creating a fresh source of demand for its shares.

FTSE Russell and MSCI are also set to add the stock to their indexes effective June 26 and June 29, respectively.

SpaceX also said on Monday that its underwriters had exercised the "greenshoe" option to purchase additional shares, increasing the total proceeds from its initial public offering to USD 85.7 billion from the USD 75 billion it raised last week.

(Reporting by Shashwat Chauhan, Medha Singh and Sruthi Shankar in Bengaluru; Additional reporting by Saqib Iqbal Ahmed and Anirban Sen; Editing by Rod Nickel, Colin Barr, David Gaffen, and Jamie Freed)