SpaceX (SPCX.US) counterattacked strongly after being targeted! The stock price rebounded nearly 40% from the low point, and short positions plummeted to 11%.

As SpaceX (SPCX.US) has recently seen a significant rebound from the post-IPO slump in its stock price, short sellers are quickly retreating. According to data from S3 Partners, as of Wednesday, SpaceXs short positions had decreased to about 11% of its publicly traded shares, down sharply from a peak of 34% last week. This decline reflects a combination of short covering and a substantial increase in the number of tradable shares following the expiration of a large lock-up period. Ihor Dusaniwsky, Managing Director of Predictive Analytics at S3 Partners, stated, Those who wanted to short have run out of bullets. There is a limit to the amount of capital you can put into a trade. As short sellers withdraw, the stock price of SpaceX has rebounded sharply from the sell-off that followed its earnings report, and the short covering likely further fueled this upward trend. For popular stocks with a high short ratio, if the stock price does not decline as expected by shorts, but rather rises rapidly, short sellers are forced to cover their positions, which can further drive up the stock price, creating a positive feedback loop of rise - cover - further rise. On Wednesday, SpaceXs stock closed up 9.65% at approximately $146, bringing its price about 8% above the IPO price of $135 and up about 39% from the low on August 3rd. Since its listing, SpaceX's stock price has experienced a rollercoaster ride. Shortly after the companys IPO, the stock price surged to an all-time high, only to subsequently evaporate over $1 trillion in market value. Following the release of the first public earnings report last Wednesday, the stock price fell by 14% in a single day, partly due to the company's spending on artificial intelligence (AI) exceeding market expectations. However, just two trading days later, market sentiment underwent a noticeable reversal. Last Friday, SpaceX's stock rose about 16%, with a cumulative gain of around 23% over two days, bringing the stock price back close to the IPO price of $135. This rebound of SpaceX is particularly noteworthy as it occurred after the market's biggest concern about the lock-up expiration, which was also one of the reasons why short sellers heavily targeted SpaceX. Last Thursday, about 911.5 million shares that were previously under lock-up entered the market, significantly increasing the number of tradable shares from 639 million to 1.55 billion, more than doubling the float. Based on previous market concerns, the influx of new shares could create significant potential selling pressure. However, the actual trend indicated that the unlocking instead became a starting point for the stock's rebound. After the expansion in the number of tradable shares, the proportion of short positions relative to the available stock naturally decreased. However, S3 Partners noted that short covering also contributed to the decline in short positions, as investors who had bet on a decline in SpaceXs stock price bought back shares to close out their short positions. There are more shares scheduled to be unlocked soon. According to the prospectus, around 319 million shares could unlock on August 20, followed by approximately 700 million shares in September and nearly the same amount in October. The influx of new shares may bring new volatility, as employees and early investors will have more opportunities to sell their stock. Meanwhile, the increased float also makes it easier for investors to establish new short positions when bearish sentiment begins to rise again. In addition to the "tsunami" of unlocked shares, SpaceX has also attracted short sellers due to its AI business, described as a money-burning black hole. For every $1 of revenue generated by SpaceXs AI business, about $6.18 is required in capital investment. Short sellers are betting that this money-burning model cannot be sustained. Despite the AI business generating $2.56 billion in revenue in the second quarter (a year-on-year increase of 247%), adjusted EBITDA turned positive for the first time at $1.146 billion, yet GAAP operating losses still reached $1.26 billion, mainly due to $1.885 billion in depreciation costs. Additionally, short sellers believe that the markets adoration for Elon Musks personal charisma and grand narratives has far exceeded the company's fundamental support. In response to the short sellers scrutiny, Elon Musk issued warnings last month. He stated, Institutions that are heavily shorting SpaceX over the long term have a very low chance of survival. He believes, There is no doubt that SpaceX's value will surpass that of the entire Earth. The tug of war surrounding SpaceX essentially represents a divergence over whether a company that has not yet turned a profit can support a trillion-dollar valuation. And SpaceXs story has never been about the now, but rather about the if. If Starship achieves full reusability, if Starlink becomes the fourth large operator, if space data centers become a realityeach if is a chip in the wager. The rapid rebound in the stock price does not mean that concerns over SpaceX's high valuation have disappeared. As the supply shock from the unlocking is gradually digested, investors still need to confront a central questionwill the market continue to pay a very high valuation for SpaceX before it fully realizes its potential in 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 break upward depends not only on the growth of existing businesses like Starlink but also on whether the market can see actual returns from investments in AI infrastructure. Matt Maley, Chief Market Strategist at Miller Tabak, pointed out that after the short-locked stock unlocking effects gradually fade, investors will ultimately still need to decide whether they are willing to buy a company that may take years to fully realize its potential at such a high price. The unlocking event that could have triggered a sell-off has been quickly digested by the market, and short covering along with bullish options trading has further amplified the upward momentum. However, as short-term trading factors gradually recede, the market will ultimately return to a fundamental questionCan SpaceX fulfill the currently high market expectations through its business growth over the coming years? If the answer is yes, then $135 may just be the starting point for the next rally; if the realization of AI and space operations falls short of expectations, then the recent surge powered by short covering and options may also become a new source of volatility.