Space Exploration Technologies (SPCX +1.32%) became the largest IPO on record in June. The stock has been highly volatile since, reaching highs of about $225.64 and lows of $104.83. How will the stock perform through the end of the year? That's hard to say. But one particular upcoming catalyst might drag down the share price. Here's what investors need to know.

Image source: The Motley Fool.

The largest single-event stock lockup expiry to date

First, a little bit of background. When companies first go public, there are legal restrictions on when insiders can sell their shares. The period before that is called the lockup period. Many corporations first entering public equity markets opt for a set period -- often 180 days -- after which most or all company insiders are free to sell their shares.

SpaceX chose a staggered lockup schedule, meaning various blocks of shares would become eligible for sale over a little more than a year from the IPO date. Lockup expiry dates can present challenges to newly public companies. If insiders sell the corporation's shares in large quantities as soon as they are legally permitted, it could put downward pressure on the stock. SpaceX has faced this challenge on six occasions already. Here's how it has fared so far.

Overall, SpaceX has performed fairly well through its various lockup expiry dates so far. The stock has climbed about 27% since Aug. 6. However, the company is racing toward its largest single-event stock lockup expiry date yet.

Two full trading days after the company reports its third-quarter earnings (SpaceX’s third-quarter update is scheduled for Oct. 20), 1.3 billion new shares will become eligible for sale (328 million new shares will also unlock on Oct. 24).

What should investors do?

Will SpaceX stock decline significantly once these new shares become available? It's hard to say. On the one hand, it is the single biggest such event in terms of the number of new shares eligible for sale. But relative to the number of shares already on the market, that's a different story.

On Oct. 6, the number of SpaceX shares eligible for sale more than doubled. It won't increase by that much after the third-quarter update. Whether or not SpaceX stock performs well over the next few weeks will also depend heavily on the company's third-quarter results. SpaceX's revenue grew at a good clip in the second quarter, and its net loss decreased significantly.

The market will be expecting that momentum to continue, and there is a chance that particularly strong results could overshadow the massive lockup expiry event. With that said, should long-term investors purchase SpaceX's shares at current levels? Note that the company's stock price has declined slightly from its $150 opening price, despite strong second-quarter results and meaningful progress on its all-important next-gen rocket, Starship, which recently flew into orbit for the first time in another successful flight test.

SpaceX has also signed additional artificial intelligence compute deals and taken steps that bring it closer to significantly expanding its connectivity business and challenging major mobile carriers, although it still has plenty of work to do on that front.

Why, then, hasn't the stock performed well since its IPO? Probably partly because of valuation concerns. At 200x forward earnings, the market is pricing in significant success from some of SpaceX's ambitions, and the company needs to exceed expectations to hope to sustain above-average returns, with little room for error. That's why I'd stay away from the space company right now.