SpaceX shares fell for a fourth straight session on Wednesday, dropping 2% to $133.34 and closing below their $135 IPO price for the first time ever.

The rocket giant had raised around $85.7 billion and fetched a valuation of around $2.1 trillion on its first trading day. The shares touched an all-time high of $225.64 shortly after the listing, which briefly propelled the company’s market valuation above those of Silicon Valley giants Microsoft and Amazon.

The drop leaves investors who entered at the offering at the IPO price sitting on paper losses, testing confidence in the stock. It also serves as a reminder that Wall Street enthusiasm can cool quickly, even for a company as large as SpaceX.

More pain ahead

SpaceX shares have been volatile since their listing. The shares surged nearly 50% in the first three days of trading, only to lose nearly a quarter of their value over the next three sessions.

There could be more pain ahead. According to a Bloomberg report, the first of many share lockups that have kept early investors from selling shares is set to expire after the company reports its first set of quarterly results. Now, if those investors begin selling after expiration, it could lead to further downside pressure on stocks.

Then, some of the stock’s early gains may have also been fueled by forced buying from passive index-tracking funds. SpaceX joined the Nasdaq 100 in July after Nasdaq eased its rules, allowing newly listed large-cap companies to be included after just 15 trading days, down from the previous three-month wait. The stock also joined the Russell 1000 Index in late June, just two weeks after its IPO.

Better entry point after initial IPO hype fades

It is important to note that it is not uncommon for a new stock to fall below the IPO price. The broader market has also remained under pressure in recent weeks as investors remain uncertain about when the Federal Reserve will cut interest rates and whether the AI-driven stock market rally, led by chipmakers, can continue.

Even then, such a massive drop shows that critics might be right about SpaceX being overvalued. The company is still unprofitable, and many of its long-term bets remain untested.

In fact, some analysts had warned before the IPO that Investors would find better entry points after the first wave of excitement had faded, Reuters reported.

Buy, sell or hold?

Despite the slump, Wall Street remains largely upbeat on the stock. Once the mandatory quiet period ended, banks that had worked on the IPO began issuing positive research reports, including Raymond James’ Street-high $800 price target.

More than 80% of analysts tracked by Bloomberg rate the company a buy equivalent, and their average price target of about $238 implies roughly 78% upside from current levels.

(With inputs from Bloomberg and Reuters)