SpaceX (SPCX) has seen its price drop by 18% from its all-time high post-IPO. As a result, average investors entering the public market are nearly back to break-even. This raises questions about whether the historic IPO has already peaked.

The stock closed at $184.98 on Thursday, marking a 3.6% drop for the day. According to CNBC, the recent 5-day volume-weighted average price for the stock is $181.71, which indicates the average buying price for retail investors post-IPO, and is attracting a lot of attention. This figure sharply declined from Tuesday's intraday high of over $225.

From $3 trillion to 7th place

Due to two days of declines, approximately $620 billion in market cap has evaporated. Consequently, SpaceX's valuation has dropped from about $3 trillion to $2.37 trillion. The company once briefly surpassed Amazon and Microsoft to become the world's 4th largest, but it has now fallen to 7th place, competing at a market cap level similar to TSMC.

The catalyst for the drop was SpaceX's announcement on June 16 that it would acquire AI coding tool Cursor's developer Anysphere in an all-stock deal valued at $6 billion. This transaction will lead to approximately a 3.4% dilution of SpaceX's $1.77 trillion IPO valuation.

Morningstar has slightly lowered its fair value estimate from $63 to $62 due to this acquisition. Morningstar stated that the stock, previously deemed overvalued, now faces additional dilution. The firm projected a fair value of $169 even in the most optimistic scenario, which is below the current trading price.

Retail investor frenzy, quickly calming down

The speed of the price reversal shows that the initial surge was primarily driven by investor sentiment. According to Vanda Research data, retail investors poured $369.8 million into SPCX during its first three days of trading. This amount is more than four times the funds that flowed into Nvidia during the same period. However, net buying plummeted to $9.1 million by Thursday, June 18.

Retail investors who got an IPO allocation at $135 on platforms like Robinhood, Fidelity, and SoFi are still seeing profits. However, most received fewer shares than they hoped for. Retail investors who bought at the peak in the public market are currently facing unrealized losses. As BeInCrypto reported before the drop, savvy traders had already positioned themselves in the perpetual futures market to brace for the correction.

Not everyone is pessimistic. Oppenheimer analyst Timothy Horan has raised his price target to $250 following the Cursor stake acquisition. He explained that this acquisition would allow SpaceX to access AI talent, training data, and an existing developer user base.

However, with the lockup expiration approaching at the end of July, the available shares could double. There's also the potential for a $20 billion bond issuance related to xAI funding. The selling pressure on SPCX is expected to increase.

Whether this is a healthy correction or the beginning of a longer post-IPO adjustment depends on SpaceX's first earnings report scheduled for the end of July.