For SpaceX IPO investors, the thrill ride has been IMAX-worthy.
On IPO day, SpaceX stock (SPCX) opened at $150 and climbed past $160. Another near-20% gain the following Monday saw Elon Musk’s spaceflight, satellite communications, and AI company achieve a high orbit of $192.50. By its third trading day, SpaceX surpassed Amazon to become the fifth-largest publicly traded company by market value.
To the moon, right?
Yet, as any savvy investor knows, things can get ugly fast: The stock quickly returned to Earth and has bounced below its market debut price more than once.
SpaceX stock is now down roughly 30% from its market debut in June and down about 50% from its all-time high of $225.64.
Read more: Create a stock investing strategy in 3 steps
This is what IPOs do
Wealth advisory Alliance Bernstein has tracked the performance of IPOs that raised $50 million or more over the past 10 years. Six months following the lockup, the median return was a 10% decline.
“While most stocks began to recover, they typically failed to revisit their initial IPO heights,” the Bernstein analysis reported. While investors are often urged to remain calm and hang on, “in the six months following traditional lock-up expirations, one in 10 IPO stocks dropped by at least 62%.”
That’s where having a plan comes in.
Plan for three possible stock scenarios
Whether SpaceX’s trajectory is high, low, or just bouncing on and off the atmosphere, investors will want a strategy in place.
If SpaceX stock soars
Every investor’s dream: The stock soars while they’re along for the ride. Still, there are strategies to consider:
Have a plan to take some profits along the way in a tax-efficient manner.
Ensure your SPCX doesn’t overwhelm your overall investment portfolio. Consider rebalancing holdings regularly to maintain a comfortable SpaceX exposure.
If SpaceX stock stalls
If SpaceX stock hits a price ceiling and stays…
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