Why Redwire Stock Keeps Dropping
Key Points
SpaceX is raising a rumored $20 billion in cash via a bond offering.
SpaceX already raised more than $80 billion at its IPO.
Why?
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Is Space Exploration Technologies (NASDAQ: SPCX) stock bad for space stocks? In a year that saw Redwire (NYSE: RDW) stock double in the run-up to the SpaceX IPO, that sounds like a strange question, but here's the thing:
SpaceX might be both good and bad for space stocks like Redwire.
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Case in point: This morning, SpaceX announced plans to float (a rumored) $20 billion of debt in what it's calling its "Inaugural Bond Issuance." SpaceX stock is down 10.5% through 12:50 p.m. ET on the news, and Redwire is down 8%.
Image source: Getty Images.
SpaceX wants (not needs) a loan
SpaceX just raised more than $80 billion in its wildly popular initial public offering. Post-IPO, the company has "approximately $100.8 billion in cash and cash equivalents" available.
So why is SpaceX seeking another $20 billion?
The biggest clue is SpaceX emphasizing the "inaugural" nature of this bond issuance. There's never been a market for publicly traded SpaceX bonds before. Presumably, one thing SpaceX hopes to accomplish with this bond offering is to gauge how popular its bonds are with investors today -- how much money it could raise if it needed to, and how much interest it would have to pay.
What this means for Redwire stock
This is why I consider the bond offering neither good nor bad news for SpaceX stock. But for Redwire, I fear the SpaceX bond offering is nothing but bad news.
Think about it. SpaceX just held an IPO that sucked $80 billion out of the market for space investors. Now, SpaceX is raising another $20 billion from investors looking to lend money to space stocks.
SpaceX is sucking all the figurative air out of the room. Cash-burning space stocks like Redwire could soon find it harder to raise the money they need.
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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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