Why Elon Musk cannot sell SpaceX shares for 366 days and what happens when the lockup ends

Elon Musk cannot sell his SpaceX shares because he signed a 366-day lockup agreement connected to the company’s June 2026 initial public offering. The restriction is designed to support an orderly market while SpaceX adjusts to life as a publicly traded company.

The lockup does more than prevent a direct stock sale, and its expiration will not automatically send billions of Musk’s shares into the market.

Why must Elon Musk wait for 366 days?

Musk must wait because he accepted a founder-specific lockup as part of the SpaceX IPO. The company’s SEC filing says his covered shares remain restricted until immediately after trading closes on the 366th day following the pricing date.

That distinction matters because the SEC did not personally order Musk to hold his shares. An IPO lockup is normally a contractual arrangement involving company insiders and the investment banks that manage the offering.

These agreements protect the early trading period from a sudden increase in available stock. They can also reassure new investors that founders and other major holders will not immediately use the public listing to exit their positions.

A typical IPO lockup often lasts about 180 days, according to Investor.gov’s explanation of lockup agreements. Musk’s 366-day term is much longer, giving the market roughly a year before his large position becomes eligible for public sale.

The longer restriction is especially important because SpaceX entered the market with a small portion of its total shares available for public trading. Limited supply helped create strong demand, but it also made the stock more sensitive to future changes in its float.

Musk’s stake also received no automatic early-release terms in the prospectus, unlike several other shareholder groups. That structure keeps the founder’s position restricted while employees and early investors receive opportunities to sell portions of their holdings sooner.

What does the lockup stop Musk from doing?

The agreement prevents more than an ordinary open-market sale. SpaceX’s underwriting agreement broadly restricts sales, offers, transfers, pledges, loans, and other transactions involving covered shares.

Musk generally cannot use a swap or similar financial arrangement to transfer the economic risk of owning the shares. Such a deal could otherwise allow him to reduce his exposure without completing a conventional stock sale.

The terms also limit certain requests to register shares for resale. They restrict public announcements of plans to complete covered transactions because even an announced intention to sell could influence investor expectations and SpaceX’s stock price.

Some transfers may still qualify for specific exceptions, including gifts, estate-planning moves, trust transfers, company repurchases, and transactions connected to equity awards. However, recipients often must accept the same restrictions that applied to the original shareholder.

Certain transactions may also be permitted when shares are needed to satisfy tax obligations. These exceptions help insiders handle ordinary legal and financial matters without opening the door to unrestricted selling during the protected period.

The lead underwriter may have authority to approve a waiver under specific conditions and disclosure rules. Musk lacks an automatic early-release provision, so investors should avoid claiming that an early sale is impossible under every circumstance.

Fun fact: The first release has actually already happened. On Aug 6, just shy of 912 million shares were unlocked, more than doubling the shares available for sale.

Why can other shareholders sell sooner?

Other shareholders can sell sooner because SpaceX created several lockup groups instead of giving every insider the same expiration date. The company tied releases to calendar dates, quarterly earnings announcements, and a possible stock-price condition.

The first major release occurred in August 2026, when roughly 912 million shares held by non-Musk investors became eligible for sale. Reuters reported that the release had the potential to more than double the existing public float.

Later stages permit portions of additional shares to become eligible at different times. Several releases occur after full quarterly results, while others follow predetermined days measured from the IPO pricing date.

One provision could release an additional portion if SpaceX stock meets a specified performance threshold around an earnings announcement. That condition means some projections may change if the market-price test is not satisfied.

The largest scheduled groups include employees, early investors, and shareholders who accepted an extended restriction. Together, these releases could make billions of existing shares eligible before Musk reaches the end of his own waiting period.

A staggered schedule limits the risk of every restricted shareholder entering the market on one date. It also gives investors several opportunities to measure actual selling demand before Musk’s much larger position becomes eligible in June 2027.

Will billions of shares flood the market?

No, eligibility does not mean billions of shares will automatically be sold. A lockup expiration only removes one contractual barrier, leaving each shareholder to decide whether to hold, sell, transfer, or distribute eligible stock.

The distinction between eligible shares and public float is essential. An unlocked share does not join the actively traded supply unless its owner completes a transaction that places it in public hands.

Many employees may want to diversify after building much of their personal wealth through SpaceX equity. Some could sell to pay taxes or major expenses, while early investment funds might return capital to their own investors.

Other holders could keep their positions because they expect SpaceX to grow through Starlink, launch services, Starship, and other projects. Strong confidence could limit actual supply even when a large number of shares become legally eligible.

More public stock can create selling pressure, but it may also improve trading liquidity. A larger float can make sizable transactions easier, reduce the effect of limited supply, and attract investors who avoided a thinly traded stock.

The first release therefore cannot predict every later unlock. Investors should compare completed sales and daily trading volume with the number of eligible shares instead of assuming every available share will be offered.

Fun fact: SpaceX has had a stunning trajectory in its brief time in the public market. The stock, which priced at $135 in the IPO, opened up at $150 on its first day of trading and surged all the way to $226 per share in the following days. 

What rules could still limit Musk after the lockup?

The lockup’s expiration will remove its contractual restriction, but Musk will remain a company insider and controlling shareholder. Federal securities laws and SpaceX’s internal trading rules may continue to limit the timing and size of his transactions.

Musk cannot legally trade while holding material information that has not been disclosed to the public. Internal blackout periods may also prevent transactions around earnings reports or other major corporate developments.

Sales of restricted or control securities may fall under SEC Rule 144 unless SpaceX registers the shares or another exemption applies. The SEC’s Rule 144 guide explains the possible volume, notice, and method-of-sale conditions for company affiliates.

Under Rule 144, an affiliate’s sales during three months are generally limited to the greater of 1% of the outstanding class or the class’s average weekly trading volume during the preceding four weeks. Registration could provide a different route for a larger offering.

Musk would also face public reporting duties as an officer, director, and major owner. The SEC explains that most reportable insider transactions must appear on Form 4 within two business days.

A proposed sale could also require Form 144, while a major ownership change might trigger an amended beneficial-ownership filing. These disclosures would help investors separate confirmed transactions from online speculation about Musk’s intentions.

What should investors watch when the lockup ends?

Investors should focus on actual filings and completed transactions when Musk’s restriction expires. The number of eligible shares creates potential supply, but documented selling determines the immediate effect on SpaceX stock.

Form 4 filings would disclose the size, timing, price, and type of a reportable Musk transaction. Investors should also monitor Form 144 notices, resale registration statements, prospectus supplements, and changes in reported beneficial ownership.

The class of shares involved will be important because SpaceX uses a dual-class structure. Class B shares generally carry 10 votes each, while Class A shares receive one vote each, giving high-vote holders greater influence.

SpaceX’s filing says Musk controls more than 50% of the voting power used to elect directors, making SpaceX a controlled company under Nasdaq rules. However, his future control would depend on how many shares he sells and which share class is involved.

Trading volume will help show whether buyers can absorb additional supply without a steep price decline. Block transactions placed with institutional investors may affect the market differently from a large series of open-market sales.

Investors should also keep SpaceX’s operating performance in view because a lockup expiration does not change revenue, costs, launches, or business prospects. June 2027 will remove a major restriction, but Musk’s actions and investor demand will decide what happens next.

TL;DR

• Musk agreed to keep his SpaceX shares locked until immediately after the market closes on the 366th day following the IPO pricing date.
• The restriction comes from an agreement with SpaceX’s IPO underwriters, not a special SEC ban against Musk.
• Other employees and early investors can sell eligible shares sooner under a staggered release schedule connected to dates, earnings reports, and possible price conditions.
• An unlocked share does not automatically become part of the public float because its owner may hold it or face additional resale requirements.
• Musk may still need to follow insider-trading rules, disclosure requirements, company policies, and Rule 144 conditions after his lockup ends.
• Investors should monitor SEC filings and actual trading volume instead of assuming that all eligible shares will immediately reach the market.

This article was made with AI assistance and human editing.

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