SpaceX’s long-awaited initial public offering triggered a selloff Friday in the shares of other rocket, satellite and space-related companies.
Since news of the SpaceX debut started circulating late last year, smaller space-related stocks had rallied on the back of it. But that came to a halt as Elon Musk‘s company seized the spotlight and underscored the flood of investment needed to build out the industry.
Even as SpaceX shares rallied, turning it into one of the world’s most valuable companies, others stumbled.
Shares of space-transportation company, Rocket Lab Corp., closed down 11%. Redwire Corp. shares slumped 12%. Satellite broadband company AST SpaceMobile Inc. closed down 16% and Firefly Aerospace Inc., the rocket and spacecraft maker, declined 19%. Intuitive Machines Inc. fell 13% and Virgin Galactic Holdings Inc., the space travel company, plunged 32%.
“SpaceX is just going to take all of the oxygen out of the space and absorb a lot of dollars and interest,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “We believe investor positioning ahead of this deal has created weakness for some of the other high-flying momentum stocks as well.”
Procure Space ETF, a fund with a market value of about $1 billion that had gained about 38% so far this year, closed down 7%. A Bank of America Corp. basket of space stocks declined 5.5%.
The moves highlight how speculative the space business remains, with SpaceX commanding a market valuation that outstrips its annual revenue a hundred times over, even though it loses money and faces fierce competition in the artificial-intelligence business.
While individual investors snapped up companies like Rocket Lab and Redwire in recent months, Vanda Research raised the possibility that some of those positions may have just been placeholders until they could shift into SpaceX stock instead.
“These stocks got caught in the enthusiasm,” said Steve Sosnick, chief strategist at Interactive Brokers. “It is reasonable to think that some of traders’ attention and dollars are gravitating to the IPO itself and away from some of the smaller names in its orbit.”
Space Exploration Technologies Corp., as it is officially known, bundles a rocket launching business, the Starlink broadband service and xAI, the AI segment. But much of the excitement about SpaceX — and its lofty valuation — stems from investors’ faith in Musk’s ability to pull off highly speculative ventures like placing data centers in orbit or colonizing space.
At Oppenheimer & Co., analyst Timothy Horan initiated coverage on SpaceX with the equivalent of a buy rating and a price target of $190, well above the $135 IPO price. He said the company “represents an opportunity to own a leading AI and connectivity giant, while also capturing the optionality of space economies.”
On Friday, shares of SpaceX climbed as high as $176.52 less than two hours after the shares started trading, before ending the day up 19% above their $135 offering price. According to data from Vanda, within the first 20 minutes, retail investors turned SpaceX into the second most-bought stock of the day, just behind Nvidia Corp.
SpaceX later surpassed Nvidia to become the most-bought stock by retail investors Friday. “We saw $120 million net bought in SpaceX,” said Vanda global macro strategist Viraj Patel. “By far the biggest name today.”
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“I am not at all surprised that space-linked stocks are losing altitude today,” said Mark Malek, chief investment officer at Siebert Financial. “The big question which investors should be asking right now is whether it will pull assets aways from the other large companies in its corner of the solar system, other S&P megacaps.”
“Some folks are in search of the next big Nvidia or — dare I even say — Tesla,” he said. “The problem is that all of these companies took years to get into the front door. SpaceX is starting at terminal valuation, entering the large cap index, literally, from the back door.”
Stephen Levy, a 27-year-old retail investor based in Chicago who quit his marketing job a year ago to trade full-time, said the decline across the space sector is “definitely a bummer.”
Levy, who moderates a thread on Reddit devoted to Redwire, one space-tech company, said he was expecting a takeoff this morning. “I’m still holding my breath.”