Lockup Flood, Treasury Drain, and a Chip Rout: The Supply Test Coming for Markets

Three separate supply pressures are converging on the same narrow window. None is decisive alone; together they form a pattern worth tracking.

The IPO Calendar: July Closes With Four Deals

The IPO market is still open for business. Renaissance Capital reports four deals scheduled for the week of July 27:^[1]

The Renaissance IPO Index was up 16.7% year-to-date as of July 23, outpacing the S&P 500’s 8.9%. The International IPO Index was up 38.7%, nearly triple the ACWX.^[1] The IPO window remains open — but the question is whether that window narrows as supply pressures mount from other directions.

Jersey Mike’s is the marquee deal. Backed by Blackstone, the Tinton Falls, NJ-based chain plans to sell 43.5 million shares at $21–$25, with 68% of the offering being secondary shares from existing holders.^[2] At the midpoint, the deal would value the company at roughly $7.3 billion — nearly matching the price Blackstone paid to take control in 2024. The company comes public levered at 5.1x pro forma debt/LTM EBITDA, unusual for a franchise restaurant.^[1]

SpaceX: The Largest Lockup Overhang in Memory

SpaceX (NASDAQ: SPCX) went public on June 12 at $135 per share, selling roughly 629 million shares — only about 5% of the company. The average IPO floats closer to 20%. That leaves an extraordinary backlog of restricted stock waiting to unlock.

The first wave hits August 6, two business days after SpaceX’s expected Q2 earnings report on August 4. Another 455.8 million shares become eligible around August 20. Further tranches follow in September and continue through the first anniversary of the IPO. Ultimately, more than 6.4 billion shares could enter the public float — over ten times what was sold at the offering.

Morningstar analyst Nicolas Owens believes most of those shares will come to market: “We believe that most of the available shares will come to market, because the existing sellers have low cost basis and long holding periods.”^[3] Renaissance Capital’s senior strategist Matthew Kennedy called it “the longest series of lock-up releases we’ve ever seen,” noting that while the structure makes sense given the company’s size, “it’s a large technical overhang nonetheless.”^[3]

The stock has already telegraphed the pressure. Shares peaked above $201 in their first week, then fell roughly 45% to a low near $111 — below the IPO price. Owens suggests the decline itself may partly reflect anticipation of the lockup dilution: “It’s conceivable that a good deal of the recent slump in SpaceX stock is precisely in anticipation of the dilution from the lockup.”^[3]

One mitigating factor: as the float expands, index funds will be forced to increase their holdings. The Invesco QQQ Trust already held roughly 39.7 million shares of SpaceX as of July 22, a 0.98% weight. If the float-adjusted market cap triples — which Morningstar’s Zachary Evens says is possible by end of September — SpaceX’s weight in the Nasdaq-100 would place it between Walmart and Intel in the QQQ portfolio.^[3] But Owens does not think index absorption will be enough: “Unless something changes the fundamental story or sentiment — like for the better — the supply from these lockups will outweigh demand even from index funds.”^[3]

Treasury Drain: $106 Billion Pulling Liquidity From Risk Assets

While the lockup clock ticks, the Treasury is draining liquidity from the system at a pace that historically correlates with rising volatility.

Net new Treasury bill settlements are expected to total roughly $56 billion on Tuesday, $37 billion on Thursday, and $13 billion on Friday — a combined $106 billion pull, according to Mott Capital’s Michael Kramer. He expects heavy issuance to persist through Labor Day, creating a sustained headwind for risk assets through the late-summer period.^[4]

The macro backdrop is not soothing. The 30-year Treasury yield closed at 5.12%, and the 30-year TIPS real yield hit 2.93% — a new cycle high.^[4] Long-end yields are rising globally: UK 30-year gilt yields jumped 9 basis points on fiscal-policy concerns, and Japanese government bond yields continue to climb on similar worries. If that global trend persists, U.S. long-end yields face upward pressure from abroad even without domestic catalysts.

Kramer also flags a relationship worth monitoring: small caps (IWM) tend to trade in line with the KOSPI over time. With the KOSPI in freefall on chip fears, that historical correlation implies potential downside for U.S. small caps if the pattern holds.^[4]

The Chip Rout: Circuit Breakers in Seoul

The catalyst that crystallized the risk-off mood arrived Monday: reports that China has begun mass-producing a DUV lithography tool, entering a market long dominated by ASML. While analysts told CNBC that ASML is unlikely to be heavily impacted given questions about China’s technology and scalability, the market reaction was immediate and severe.^[5]

The KOSPI triggered a sell-side sidecar after opening down more than 5%, then breached circuit-breaker levels for the eighth time this year, closing down 10.84% at 6,023.66. Samsung Electronics fell 9.5%, SK Hynix dropped 11.1%.^[6] U.S. futures for NVDA, AMD, ASML, and Micron each slid approximately 5%.^[5] Benzinga reported more than $1 trillion in market value was wiped out across semiconductor and memory stocks globally.^[6]

Separately, memory chipmakers have announced $2.1 trillion in cumulative capacity expansion plans, stoking fears of a 2028 glut just as AI-demand certainty wobbles.^[5]

Smaller Lockup Expirations Also in the Queue

SpaceX is the headline, but it is not the only lockup pressure arriving in August:

• Veradermics (NYSE: MANE): Lockup expires August 3. The company raised $256 million at $17/share in its February 4 IPO.^[7]
• Fundrise Innovation Fund: Accelerated lockup expiration to August 14, making restricted shares tradable earlier than initially planned.^[7]
• SpaceX tranches: August 6 (initial wave), August 20 (~455.8M shares), September (further tranches), continuing through June 2027.^[3]

What to Watch Next

1. SpaceX Q2 earnings (expected August 4): The first lockup wave hits two business days later. The earnings call is the last chance for management to frame the narrative before selling pressure begins. Watch for any forward guidance that could shift sentiment.

2. Jersey Mike’s (JMKE) pricing and first-day performance: A $1 billion deal led by a Blackstone-backed franchise at 5.1x leverage is a barometer for risk appetite in consumer IPOs. If the deal prices below the $21–$25 range or breaks issue price on day one, it signals tightening demand.

3. Treasury auction results through Labor Day: If demand at bill and coupon auctions softens while issuance remains heavy, the liquidity drain accelerates. Watch bid-to-cover ratios and indirect-participation rates.

4. Semiconductor stabilization or escalation: The China DUV story is still developing. If Samsung and SK Hynix stabilize and NVDA holds key technical levels, the chip rout may prove transient. If not, the $2.1 trillion capacity expansion narrative becomes the dominant frame.

5. KOSPI–IWM correlation: If the historical relationship holds, the KOSPI’s 10.8% plunge implies further downside for U.S. small caps. Watch for divergence — a break of the correlation would itself be informative.

The pattern here is one of converging supply: locked-up shares unlocking, Treasury issuance absorbing cash, and a chip-driven sentiment shock arriving simultaneously. Any one of these would be manageable in isolation. The question is whether the market can absorb all three at once without a meaningful repricing of risk.

This article is for research and educational purposes only and does not constitute investment advice.