The SpaceX lock-up rally does not mean the supply risk disappeared. It means investors became too certain about what that supply would do.

The first major lock-up expiration arrived with almost every ingredient for a selloff. Up to 911.5 million shares held by employees and early investors became eligible for sale, adding to an IPO float that had already been unusually tight. The stock had fallen below its $135 IPO price before the event, and the obvious trade was to assume that more available shares would mean more pressure. Reuters reported that the number of shares available for public trading more than doubled after the first lock-up restriction expired.

Then the stock rallied.

MarketWatch described it as one of SpaceX’s best days since coming public, while The Wall Street Journal said the shares jumped about 16% as lock-up fears faded. That does not prove the market suddenly discovered that SpaceX is cheap. It proves something more useful. The selloff had become too easy to explain, too visible to trade around, and probably too crowded by the time the actual event arrived.

In my last Forbes article on SpaceX, I argued that the August 6 unlock was not dilution. The shares already existed. The issue was liquidity, ownership, and what happens when a stock initially priced on scarcity meets a larger pool of potential sellers. The key question before the unlock was not who could sell, but who had to sell.

That question still matters. But after the rally, a second question matters more: who had already positioned for the selling before the sellers arrived?

SpaceX Lock-Up Rally Did Not End The Supply Test

The lock-up was not a non-event. The market just overestimated how mechanical the selling would be. The event mattered because SpaceX came public with a notably small public float relative to the company’s size. In July, Reuters reported that the IPO made less than 5% of SpaceX shares available for public trading, creating scarcity around one of the most demanded listings in recent memory. Axios also noted before the unlock that the first expiration could substantially increase the tradable supply of stock.

Scarcity........

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