Short interest in SpaceX has fallen to roughly 11% of its tradable float, down from a peak of 34% just seven days earlier, according to S3 Partners. The stock has climbed about 41% off its Aug. 3 low, rebounding above the $135 IPO price and toward the $150 opening price.
Shorts run out of ammunition
The retreat comes as bearish traders who piled in ahead of last week's earnings report and a share lockup expiration have largely covered their positions. Ihor Dusaniwsky, managing director at S3 Partners, put it bluntly: "Shorts that wanted to short are out of bullets." A 911 million share unlock added fresh tradable float as bears retreated, giving the market more supply to absorb.
Short interest in SpaceX had overtaken Tesla's ahead of the earnings report, a sign of how crowded the bearish trade had become. The lockup expiration, which freed up millions of shares, was expected to give shorts more room to press. Instead, the opposite happened — the stock surged, and the bears scrambled to cover.
A frothy trade
Bob Sloan, founder of S3 Partners, called SpaceX "probably the frothiest trade ever" and noted its role in Delta 1 trading strategies. He drew a parallel to the memory chip sector, where he flagged the trade's peak on June 22; Micron was up about 7% this week. The comparison suggests the current squeeze may have further to run, or that the froth is about to be tested.
Delta 1 strategies, which use derivatives to replicate physical ownership, can amplify moves in both directions. When a stock like SpaceX is heavily borrowed and the price turns, the unwind can be violent. That's what appears to have happened over the past week.
The split in space and AI stocks
The short-covering rally is splitting space and AI-infrastructure stocks. Vast Space and Planet Labs are attracting long interest, while Intuitive Machines and AST SpaceMobile see more bearish bets. That divergence suggests investors are picking winners rather than buying the whole sector.
For SpaceX, the rebound has been broad, but the same momentum isn't lifting every name in the space trade. The market is rewarding companies with clear revenue paths and punishing those with speculative valuations.
Support becomes springboard
The $148 support level that once threatened further downside has become a springboard for the rebound. The stock now sits above the $135 IPO price and is closing in on the $150 opening price. The 911 million share unlock that added fresh float is now being absorbed, and the question of whether the rebound holds above $150 will likely shape the next leg for the stock.
