After a hot start with its IPO two weeks ago, SpaceX stock has seen almost all of its gains erased.

SpaceX stock has fallen for three consecutive trading days as of Monday, dropping 8 percent in one day alone. It is now trading at under $170 a share — roughly where it was on the day SpaceX went public.

Elon Musk's space exploration and AI company went public on June 12 with the biggest IPO in history, one which made Musk a trillionaire. On June 16, SpaceX stock hit a high of more than $225. Days later, SpaceX announced that the company had acquired AI coding agent Cursor. Shortly after the $60 billion acquisition announcement, SpaceX stock fell and has been tumbling ever since.

What's the problem with SpaceX stock?

There are an increasing number of red flags on SpaceX stock that seem to be sending some investors running the other way — not to mention orange ones.

MSCI, the finance company and index provider, has slapped SpaceX with a score of one out of 10 in its “controversies” category. SpaceX has received an “orange flag” due to this score, which notes if a company is involved in one or more severe controversies. 

A score of zero out of 10 and a "red flag" would have been awarded if SpaceX was found to be “directly involved in one or more very severe ongoing controversy cases,” according to the Financial Times. For example, Volkswagen received a MSCI red flag in 2022 after allegations of forced labor at an assembly plant in China.

Worse for SpaceX was MSCI awarding the company with the lowest possible environmental, social and governance (ESG) rating, a Triple-C ESG rating. ESG is often used by investors and funds looking for the most ethical, least problematic stocks — helping them avoid tobacco companies and firearm manufacturers, for example.

Musk's company is "lagging its industry based on its high exposure and failure to manage significant ESG risks," MSCI notes. For example, SpaceX's IPO revealed $3 billion in new gas turbines for an AI data center project in Mississippi — where the company is already being sued for running gas turbines without an air permit.

SpaceX's Triple-C grade is the same one given to Russia, on MSCI's international government version of the scale, after the invasion of Ukraine in 2022.

Other MSCI concerns include SpaceX's limiting of shareholder rights, its concentration of control (Musk has 40% of shares but 80% of voting rights), conflicts of interest with his other companies, and a lack of independent board members.

MSCI's ESG rating for SpaceX is likely to catch Musk's attention. Musk has previously lashed out when Tesla was removed from the S&P 500 ESG Index in 2022 due to claims of racial discrimination at the electric vehicle company, as well as scant details on Tesla's low-carbon strategy.

Back then, Musk called the whole ESG concept a "scam" that was "weaponized by phony social justice warriors" — so if history is any guide, expect a torrent of rage tweets direct at MSCI.