Elon Musk Says the Short Sellers Betting Against SpaceX Have a Very Low Survival Probability. Their Bets Now Equal 32% of the Float.

A $60B Vote of Confidence

Elon Musk's warning to short sellers that their survival probability is very low is a significant development in the SpaceX story. The company's short position has grown to 32% of its float, with 206 million shares sold short. This is a crowded bet, and Musk's statement suggests that the shorts may be trapped. The market took its time coming around, with shares rising 3% on Tuesday to close at $123.46, snapping a seven-session losing streak. However, the shorts are not cornered, as the float is about to grow with the expiration of lock-ups in the months after the earnings report. This could make shares easier to borrow and buy back, reducing the pressure on the shorts. The debate is not about whether SpaceX is impressive, but how much of its future a $1.6 trillion market value already prices in. The company generated $19 billion of revenue over the trailing 12 months, up 33% year over year, but it is still losing billions of dollars a year. The stock trades at more than 80 times sales, making it a high-risk investment. A short squeeze needs more than a big short position; it needs shorts who are forced to buy back shares, and a thin supply of shares available for buying makes the scramble worse. Some of those mechanics are arguably present here, but the shorts are not cornered. The float is about to grow, and the Aug. 4 report could force a scramble to buy back shares if results impress. However, one mechanical detail works in the shorts' favor: the float is about to grow. SpaceX's publicly tradable float is only around 640 million shares, or roughly 5% of the more than 13 billion shares outstanding. As lock-ups expire in the months after the earnings report, that float should expand dramatically. More supply makes shares easier to borrow and easier to buy back. This is the opposite of a trap tightening. So Musk may be right that betting against SpaceX is dangerous over time, but the shorts are not cornered. A squeeze could send shares sharply higher in the near term, but it is a trade, not an investment thesis. Nothing about Tuesday changed what the company earns or what it spends. For me, the more useful event is two weeks away. The Aug. 4 report will give investors their first real look at SpaceX's financials as a public company. In the meantime, I'm not betting with the shorts against a company growing 33% a year and with a massive long-term runway. But with the stock's valuation at more than 80 times sales, I'm also not betting with Musk yet, either. I'll wait for the Aug. 4 numbers.