SpaceX (SPCX.US) fought back strongly after being targeted! Its stock price has rebounded nearly 40% from the lows, and short positions have dropped sharply to 11%.

As SpaceX (SPCX.US) shares stage a significant rebound from a post-IPO slump, short sellers are quickly retreating. According to data from S3 Partners, as of Wednesday, SpaceX's short position has decreased to about 11% of its publicly traded stock, a substantial drop from a peak of 34% last week. This decline reflects a combination of short covering and a significant increase in tradable shares following the expiration of the first large lock-up period. Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, stated, Those who want to short have run out of bullets. The amount of capital you can put into a trade is ultimately limited. As short sellers withdraw, the stock price of SpaceX rebounded sharply from the sell-off following its earnings report, and short covering may have further fueled this rise. For popular stocks with a high short ratio, if the stock price does not decline as expected but rises quickly instead, short sellers may be forced to cover their positions, further pushing up the price, creating a positive feedback loop of "risecoverfurther rise." On Wednesday, SpaceX shares rose 9.65% to about $146, bringing the stock price to approximately 8% above the $135 IPO price and about 39% higher than the low on August 3. Since its listing, SpaceX shares have experienced a roller-coaster ride. Shortly after the IPO, the stock price swiftly climbed to an all-time high before losing over $1 trillion in market value. Last Wednesday, after releasing its first public earnings report since going public, the stock fell 14% in one day, partly due to the company's spending on artificial intelligence (AI) exceeding market expectations. However, just two trading days later, market sentiment reversed sharply. Last Friday, SpaceX shares rose about 16%, with a cumulative increase of approximately 23% over two days, bringing the stock price back near the $135 IPO price. This rebound in SpaceX is particularly notable as it occurred after the market's biggest worries about locked-up shares were addressed, one of the reasons short sellers had targeted SpaceX aggressively. Last Thursday, about 911.5 million previously restricted shares entered the market, increasing the number of tradable shares from 639 million to 1.55 billion, more than doubling the float. Concerns prior to this massive influx were that the new shares would create significant selling pressure. However, the actual outcome showed that the unlocking of shares instead marked the beginning of the stock's rebound. With the expansion of the float, the short position as a percentage of tradable stock naturally declined. However, S3 Partners highlighted that short covering also contributed to the decrease in short positions, as those betting against SpaceX's stock price bought back shares to close their short positions. More shares are set to unlock soon. According to the prospectus, approximately 319 million shares may be unlocked on August 20, followed by about 700 million shares in September and nearly as many in October. The influx of additional shares may bring new volatility as employees and early investors will have more opportunities to sell. Meanwhile, a larger float will also allow investors to more easily establish new short positions if bearish sentiment resurfaces. In addition to the impending "unlocking tsunami," another reason short sellers are focused on SpaceX is the capital-intensive nature of its AI business. SpaceX reportedly spends about $6.18 for every $1 of revenue generated in its AI endeavors. Short sellers are betting that this cash-burning model cannot be sustained. Despite the AI business generating $2.56 billion in revenue in the second quarter (a 247% year-over-year increase) and achieving its first positive EBITDA of $1.146 billion, GAAP operating losses still reached $1.26 billion, primarily due to $1.885 billion in depreciation expenses. Additionally, short sellers believe the market's adoration for Elon Musk's personal brand and grand narratives has far exceeded the company's fundamental support. In response to the tightening short positions, Elon Musk issued several warnings last month. He stated, "Institutions that are heavily shorting SpaceX are unlikely to survive. There is no doubt that SpaceX's value will exceed that of the entire Earth." The debate surrounding SpaceX's bullish and bearish positions fundamentally centers on the question of whether a company that has yet to become profitable can support a trillion-dollar valuation. The story of SpaceX has never been about now but about what if. What if Starship achieves full reusability, what if Starlink becomes the fourth major carrier, what if space data centers become a realityeach "what if" represents a new chip in the bet. The rapid price rebound does not mean that market concerns about SpaceXs high valuation have vanished. As the supply shock from the unlock is gradually absorbed, investors still face a core questionwhether they are willing to continue paying a high price for a company that may take years to fully realize its potential, especially amidst its AI, satellite internet, and space operations. Currently, SpaceX is betting on multiple growth directions, including rocket launches, satellite internet, and AI infrastructure. Whether SpaceX's stock price can continue to rise depends not only on the growth of existing businesses like Starlink but also on whether the market can see tangible returns from investments in AI infrastructure. Matt Maley, chief market strategist at Miller Tabak, pointed out that once the trading impact from locked-up shares fades, investors will ultimately still need to decide if they are willing to buy into a company that may require years to fully deliver on its potential at such a high price. The unlock, which could have triggered a sell-off, has been swiftly digested by the market, with short covering and bullish options trading further amplifying upward momentum. However, as short-term trading factors gradually recede, the market will ultimately return to a fundamental questionwhether SpaceX can meet the currently high market expectations through business growth over the coming years. If the answer is affirmative, the $135 mark might just be the starting point for the next leg of the rise; if the pace of realizing potential in AI and space operations falls short of expectations, then the recent spike driven by short covering and options could become a new source of volatility.