York Space and Firefly Are Riding SpaceX's Coattails. Smaller Space Stocks Post Strong Gains.

Last Wednesday was a great day to be a space investor. (Thursday and Friday, somewhat less so!)

Rumors that SpaceX would file its IPO prospectus, which turned out to be false, set space stocks on fire. Shares of recent space IPOs York Space Systems (NYSE: YSS) and Firefly Aerospace (NASDAQ: FLY) shot up 5.1% and an astounding 16%, respectively, on Wednesday.

Image source: Getty Images.

The enthusiasm didn't last long, however. By Thursday, York had given back all of Wednesday's gains. (York did begin rising again Friday, however.) Firefly dropped only 2.6% on Thursday -- but then sold off 11.6% on Friday.

SpaceX's coattails, it would appear, were shorter than many space investors had hoped.

Hope springs eternal

Or perhaps investors were simply too impatient? After all, whispered among all the cheering about the possibility that SpaceX would maybe file for its IPO last week was the caveat that it might hold off until this week instead. If I had to make a wager, I'd bet we'll actually see the SpaceX prospectus -- and have a chance to invest in SpaceX -- in relatively short order.

That won't necessarily be good news for York and Firefly, however.

SpaceX versus York versus Firefly

Consider what we know about these three space stocks. Although the lack of a prospectus means we're still guesstimating at this point, most analysts agree SpaceX is probably a $16 billion-a-year company earning about $3 billion in annual profit. It's a space giant with its fingers in multiple space pies, from rockets to satellites to artificial intelligence (orbital data centers).

York Space is a much smaller operation. Valued at $2.7 billion in market capitalization, it's a rounding error next to SpaceX's rumored $1.75 trillion market cap. Focused primarily on building satellites, York boasts only $386 million in annual profit but is losing $84.5 million per year and burning $130 million in negative free cash flow.

Firefly stock is a bit bigger than York at $3.7 billion in market cap, but Firefly's business is smaller. Revenue clocks in just under $160 million. Annual losses topped $334 million last year. Negative free cash flow was $238 million.

Take away the names. Forget about the popularity factor. In any contest between an anonymous small, unprofitable, cash-burning company and a profitable rival 400 to 600 times its size, who do you think will win? Which stock would you prefer to own?

SpaceX will crush small space stocks

This is my big worry about the SpaceX IPO, at least in the near term. Over the long term, yes, history is replete with stories of small companies that beat the odds and grow to defeat their larger rivals. But in the short term, I expect many investors will weigh their options and decide they'd rather own SpaceX stock than York or Firefly -- or anyone else in space, really. I worry investors will instead sell these other stocks to buy SpaceX stock.

Far from providing coattails for its rivals to ride, my hunch is the SpaceX IPO will pull the rug out from under them.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.