Why Redwire Stock Crashed Today
Key Points
SpaceX IPOs today.
Investors are selling off Redwire stock.
This is no coincidence.
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So I guess I was both right and right about the SpaceX (NASDAQ: SPCX) IPO.
Right first, because I predicted SpaceX IPO fever could drive space stocks higher. Indeed, shares of space infrastructure company Redwire (NYSE: RDW) have roughly doubled over the past four months.
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That's the good news. I was also right, unfortunately, about what would happen on the IPO date. And this, in a nutshell, is why Redwire stock fell 7% through 11:15 a.m. ET today.
Image source: Getty Images.
Three scenarios for SpaceX and space stocks
Four months ago, I ran down three theories for how the SpaceX IPO might play out, both for SpaceX itself and for the other space stocks in the nascent space industry. Briefly, these scenarios went like this:
- Option 1: SpaceX IPO fever could make space stocks more popular, driving up their stock prices.
- Option 2: SpaceX could make space stocks not named SpaceX less popular, if they suffered by comparison to SpaceX, which is so much bigger and more profitable than SpaceX's competitors.
- Or Option 3: Investors wanting to buy SpaceX stock might sell shares of other space stocks to raise cash to buy SpaceX instead.
What's next for Redwire stock
The fact that Redwire stock went up so much over the past four months means I was right about Option 1. The fact that Redwire stock is nonetheless selling off today -- the same day investors are presumably preparing to pay for their new SpaceX IPO shares -- strongly suggests I was right about Option 3 as well.
And Option 2? This remains to be seen. SpaceX's IPO prospectus made clear SpaceX isn't nearly as profitable as we once believed -- indeed, that it's losing money. Bigger isn't necessarily better, and tiny Redwire could still be a winner if it turns profitable before SpaceX does.
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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.
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