Elon Musk’s SpaceX (NASDAQ:SPCX) made history this month with the largest IPO ever and a record $25 billion bond sale. The debt side of that story is now unraveling fast.

Paper losses on the offering have reached roughly $305 million since trading began Tuesday, according to a Bloomberg report citing dealer quotes on the 2056 notes. The longest-dated bonds have widened as much as 0.28 percentage point past their issue spread.

Credit traders told Bloomberg they cannot recall a recent investment-grade deal weakening this sharply.

A Perfect Storm For The Longest Bonds

Order books had swelled to nearly $90 billion before pricing. The 30-year tranche has since erased all the spread tightening that came with that demand.

“We expected SpaceX to widen from issuance level, but not this much,” Impax Asset Management portfolio manager Tony Trzcinka told Bloomberg, calling it a “perfect storm” of a $600 billion equity slide, weak technicals from upsized supply, and confusion over how to price the company’s risk profile.

The risk profile question may come down to xAI. Bond proceeds are largely earmarked to pay down a $20 billion bridge loan used to clear xAI’s existing debt following the February merger, and the AI unit posted a $6.4 billion operating loss last year.

Fitch Ratings flagged Musk dependence as a “key rating constraint,” but the capital-intensive AI buildout sits underneath that label.

A Great Rebalancing May Be Coming

The pressure may not stay confined to the bonds. Former SEC Chair Gary Gensler said this week that a “great rebalancing” could hit SPCX once the August lockup expires and early backers begin taking profits.

Gensler said some venture capitalists and sovereign wealth funds may trim their exposure by a third, half, or even three-quarters once shares unlock.

Polymarket Sees A Russell-Fueled Floor

The equity side is telling a different story for now. FTSE Russell is officially adding SPCX to its U.S. indexes at Friday’s close as part of its semi-annual reconstitution, forcing passive funds to buy an estimated $3 billion worth of shares in a narrow window near the bell.

That technical wall helps explain why Polymarket traders see little near-term downside.

With SPCX sitting at a $2.05 trillion market cap, a live market on where it closes the month has drawn nearly $1.4 million in volume.

Traders assign a 66% chance the valuation stays above $2 trillion, 33% odds it lands between $1.5 trillion and $2 trillion, and just 2% that it slips below $1.5 trillion.

Credit-default swaps tied to SpaceX bonds began trading this week, giving investors a fresh way to hedge or speculate on the company’s investment-grade rating.

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