Key Points

SpaceX's historic IPO initially released a tiny portion of the company's stock to public investors.
That number, called the float, will expand enormously as lockups expire.
Additionally, Musk's 42% stake will expire next June.

Space Exploration Technologies (NASDAQ: SPCX), or SpaceX as most know the company, recently became the largest IPO in history. But investors may not realize just how little of the company is currently trading on the market. SpaceX sold 555.6 million shares to public investors, which sounds like a lot, but it is not. That is only about 4% of the total company.

Major investors, employees, and insiders own the rest. That includes CEO Elon Musk, who owns approximately 42% of the company through a combination of more than 4.8 billion shares and stock options. However, Musk is bound to an extended lockup provision that prevents him from selling any of his shares until June of next year, or 366 days after the IPO.

Here is a look at how these provisions might affect SpaceX stock between now and then.

Image source: The Motley Fool.

SpaceX structured its lockup window to minimize volatility

Musk and his companies have an enormous following, especially among individual investors. SpaceX tried to account for this when it planned out its lockup periods. Lockups prevent insiders and major investors from dumping shares on the market once a company goes public. Typical lockups expire after 180 days, but SpaceX has staggered its lockups to minimize volatility in its share price.

There are multiple lockups, not including the extended lockup Musk is subject to.

Investors can sell up to 20% of their stock shortly following SpaceX's second-quarter earnings report, its first since the IPO. Another 28% unlocks following the company's third-quarter earnings report. Investors might be able to sell more, based on how the stock is trading at the time.

Additionally, shares will steadily unlock in 7% increments, regardless of share price, on days 70, 90, 105, 120, and 135 after the IPO. Any remaining shares, excluding the extended lockup, unlock at the traditional 180 days.

Musk's eventual lockup expiration could weigh on an expensive stock

The important point here is that the number of shares available for trading will increase significantly over the next six months. Although it is unlikely that Musk will dump his stake next year, even trimming it to monetize some of his fortune could continue to push lots of new shares into the market a year after the IPO, after a ton of stock has already flooded the market. That could weigh on the share price without sufficient demand to absorb all those additional shares.

It is not the only factor. SpaceX went public amid a ton of hype and excitement, which drove the stock's valuation to pretty lofty heights. The stock still trades at over 100 times its 2025 revenue of $18.6 billion. In other words, there is a ton of room for shares to fall if sentiment turns south. It is a risk worth considering when deciding whether to buy the stock.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.