Short sellers have dramatically increased their positions over the past three weeks as the newly public aerospace giant struggles to hold above its initial public offering price. With nearly $25 billion riding on the stock falling further, investors are watching to see whether the pessimism proves justified or sets the stage for a powerful short squeeze.

The timing is notable. SpaceX is approaching several major catalysts, including its latest Starship launch, upcoming earnings, and a series of lockup expirations that could flood the market with millions of additional shares.

Short Interest Explodes in Just Three Weeks

According to data from S3 Partners, roughly 185 million SpaceX shares are now sold short, representing approximately 29% of the company’s publicly tradable float.

Just three weeks ago, bearish positions totaled an estimated 40 million shares, or roughly 5% to 7% of the float.

That rapid increase has pushed the value of outstanding short positions to approximately $25 billion, making SpaceX one of the most heavily shorted large-cap stocks in the market.

“We are seeing continuous demand from short sellers building speculative positions since the IPO,” Matthew Unterman, head of research at S3 Partners, told CNBC.

The aggressive positioning suggests many traders believe the recent weakness has further to run.

SpaceX Stock Gives Back Most of Its IPO Gains

After a strong debut, SpaceX shares have struggled to maintain momentum.

The stock has fallen roughly 20% during July, briefly dipping below its $135 IPO price for the first time before recovering modestly. Shares were recently trading near $136, while intraday trading showed additional volatility.

The pullback has erased much of the enthusiasm that followed the company’s long-awaited public debut and has emboldened bearish investors betting that additional selling pressure is still ahead.

For long-term investors, however, the decline also raises the question of whether the market is becoming overly pessimistic on one of the world’s most influential aerospace and satellite companies.

The Real Concern: Millions More Shares Are About to Hit the Market

The biggest issue facing SpaceX may not be its business performance but its share structure.

Only about 5% of the company’s approximately 13 billion outstanding shares were available for public trading following the IPO. The remaining shares remain subject to lockup agreements that prevent insiders and early investors from selling immediately.

According to KeyBanc Capital Markets, the first major unlock is expected around the company’s second-quarter earnings release, when roughly 11% of outstanding shares could become eligible for sale.

Additional unlocks are expected roughly 70 days after the IPO, followed by more releases tied to performance milestones and the company’s third-quarter earnings.

An increase in available shares often creates temporary selling pressure as early investors take profits, even if the underlying business remains healthy.

Elon Musk’s Massive Stake Remains Locked Up

One important factor limiting immediate selling pressure is Elon Musk himself.

Musk owns approximately 42% of SpaceX’s outstanding shares, making him by far the company’s largest shareholder.

His holdings remain locked up until June 2027, meaning the single largest source of potential insider selling will remain off the market for nearly another year.

That provides some stability, although other early investors, employees, and institutional holders could still add significant supply as lockup restrictions expire.

A Major Starship Launch Could Shift Sentiment

Investors won’t have to wait long for another catalyst.

SpaceX is scheduled to conduct its 13th Starship test flight on Thursday, an event that could influence both investor confidence and market sentiment.

Successful launches have historically reinforced optimism surrounding the company’s long-term ambitions in reusable rockets, satellite deployment, lunar missions, and eventually Mars exploration.

Conversely, setbacks during high-profile launches can temporarily weigh on shares, particularly when investor expectations are elevated.

With bearish positioning already at unusually high levels, even modestly positive news could force some short sellers to cover their positions.

Why Investors Should Pay Attention

Heavy short interest does not automatically mean a stock will continue falling.

In some cases, elevated bearish positioning reflects legitimate concerns about valuation, slowing growth, or technical weakness. In others, it creates the conditions for a short squeeze, where rising prices force short sellers to buy back shares, accelerating gains.

With nearly one-third of SpaceX’s public float currently sold short, future earnings results, Starship milestones, and lockup-related selling could all produce outsized market reactions.

For investors, the next several weeks may determine whether Wall Street’s growing bearish consensus proves correct or whether one of the market’s most closely watched IPOs stages an unexpected rebound.