SPCX projected price movement: The Math and the myth

Investor summaryBearish

The author argues SPCX's 96% lockup expiration will act as massive dilution, projecting a crash to ~$9 unless market cap grows 100x.

Bear points

The upcoming 96% lockup expiration will massively increase share supply, acting like a severe dilution event.
Market cap growth is unlikely to outpace the massive influx of new shares entering the market.
To maintain a $100 share price post-lockup, the market cap would need to grow 100x from its current ATH.

SPCX逼空 / Meme

Post body

SpaceX debuted at $135, reach at - time - high price of $225.64 before closing at $156.11 in the most recent trading session.

Lots of arbitrary figures thrown out from both the bulls and the bear.

Here's the current configuration:

\- Current float in the market: 4% equivalent to around 640M shares give or take.

\- Current locked up float: 96% equivalent to (96%/4%) \* 640M = 15.36B shares.

\- Market cap based on ATH: 640M x $225 = $140,800,000,000 = $140.8B.

But if one reframes this current configuration, it is equivalent to a dilution event. Reframing this allows one to invoke the dilution formula.

In this dilution event, one can make a reasonable assumption that the already large market camp makes it extremely difficult for the market cap to continue increasing faster than the dilution impact from the additional shares entering the market. As such, one can make a reasonable assumption to argue that growth in market cap is much slower than growth in supply of shares entering the market.

First fact

Using the generous ATH market cap and dividing it by the 15.36B shares released upon the lock up expiration puts the share price at $140.8B / 15.36B shares = $9.167 to 3 decimal points.

https://preview.redd.it/phkl9ibvb69h1.png?width=672&format=png&auto=webp&s=8bcc85aabbde38b73f1b28ea4795aa5bc5a03bc9

The ATH market cap at $225/ share (extreme bottom left) before increasing in steps of $100/ shares shows the corresponding share price upon the lock up expiration.

So at $225/ share, the projected share price at lock up expiration is $9.167/ share and so on. At $5,720/ share, the project share price upon the lock up expiration is $238.334/ share.

For SpaceX share price to remain at $100 upon the 96% float release, the market cap at that time has to be 100x that of the current ATH of $225/ share.

Second fact

How does increasing the per share price by $50 changes the market cap? This is important because it provides insight into how fast the market cap is expanding give a unit of share price increase. The projected share price in the dilution formula is directly related to the market cap so the velocity (first derivative, rate of change) of market cap expansion impacts projected share price.

https://preview.redd.it/5g7zxda2f69h1.png?width=676&format=png&auto=webp&s=3c47fba36d55dd809f19f9bb07d05100d2979c75

So the calculation begin from $225/ share and increase in steps of $50 per share. The first $50 increase in share price from $225 to $275 shows a +45.45% change in market cap, $275 to $325 shows a +31.25% change in market cap.

The above shows the trend between $225/ share to $5,720/ share in steps of $50/ share.

As the market cap grows larger, it becomes increasingly difficult to increase the velocity of the market cap which directly impacts the projected share price at the expiration of the lock up period.