SpaceX to allow early share resale before usual six‑month lock-up

A SpaceX Falcon 9 rocket with a payload of second-generation Starlink V2 Mini internet satellites lifts off at the Cape Canaveral Space Force station in Cape Canaveral, Fla., Wednesday, April 19, 2023. (AP Photo/John Raoux)

SpaceX plans to allow a large portion of its shares to become eligible for resale before the usual six‑month restriction period post-IPO, under a staged system conditioned to the company’s performance, a company filing shows.

The approach, designed to avoid a large wave of shares hitting the market at once, would depart from the standard 180-day lock-up that has prevailed in the U.S. Most companies going public restrict early investors from selling shares to help stabilize the stock.

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SpaceX is betting on its future success for a faster process. With the company aiming for a US$1.75 trillion valuation, sales of even a small percentage of shares could represent tens of billions of dollars.

“It is probably better for the market that there will not be one big lock-up cliff,” said Mayer Brown attorney Ali Perry, who specializes in public launches.

The structure, unusual but not unprecedented, will allow certain shareholders to sell stock as early as after the company’s first quarterly earnings release post-IPO, if SpaceX performs well.

If the company and its stock performs well, most of the restricted pool could become eligible for sale over the following months, with any remaining shares unlocked at the end of the six-month period.

Restrictions usually apply to existing investors, employees, large institutional investors or people with access to privileged information.

Musk, who holds 85.1 per cent of the voting power and 12.3 per cent of the economic interest in Class A shares, has agreed to a 366‑day restriction to sell his shares, according to the filing.

AI chip designer Cerebras, valued above US$100 billion, has also adopted a staggered resale system, more common during the 2020 to 2021 IPO boom when companies had leverage to shape terms.

The staged release spreads potential resale over time and helps make post-IPO trading more orderly, but at the cost of potential volatility spread across the six-month period, rather than on a single day, lawyers say.

“The staggered approach smooths out the initial impact, but doesn’t eliminate the impact, just redistributes it,” Perry said.

Under the plan, up to 20 per cent of the restricted shares can be sold shortly after the second-quarter earnings release. An additional 10 per cent is contingent on the stock trading at least 30 per cent above its offering price.

Further blocks of seven per cent are scheduled to become available at five points between 70 and 135 days after the listing, followed by another 28 per cent after a subsequent earnings report.

Any shares not already released would become eligible at the 180‑day mark.

SpaceX is yet to disclose the total number of shares subject to the staged lock‑up or the exact percentage of outstanding stock eligible for early release, with key figures redacted.

Aside from stabilizing the stock, companies also typically turn to staggered lock-up periods to differentiate liquidity across shareholder groups, such as employees and early investors, or to keep stricter resale restrictions on top executives.

SpaceX is also yet to disclose which holders dominate the early‑eligible pool — such as people close to privileged information versus institutional investors — and how likely stock‑price triggers tied to performance will be met.

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Aside from Musk, other significant investors have also agreed to not sell their stocks for 366 days, according to the filing, which does not disclose the percentage they represent of the total.

Staggered releases are something of a throwback to the last major IPO boom in 2020 and 2021, when capital was abundant and demand was aggressive. Some of the era’s biggest listings — including Airbnb, DoorDash and Snowflake — adopted phased structures that allowed selected shareholders to sell portions of their holdings earlier, while keeping directors and officers locked up for longer periods.

More recently, however, the market has largely reverted to simpler structures. Where variations do appear, they tend to be targeted rather than sweeping.

Cerebras has also used a phased insider release structure in its recent listing, while Rubrik introduced performance-based triggers tied to stock-price thresholds and earnings timing.

Reddit and Ibotta have also used hybrid mechanics linking unlocks to earnings windows and blackout periods.

(Reporting by Echo Wang and Sabrina Valle in New York, Editing by Franklin Paul)

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